Oil Slips Back to $66, Eyes on Fed Outlook

Key Market Events

Bearish sentiment persists: Rising inventories, oversupply risks, and fears of economic contraction continue to weigh on oil prices. Short-lived geopolitical impact: The positive effects of sanctions and geopolitical tensions remain temporary, with oil prices respecting a key support zone established since December 2021
Central bank policies in focus: Amid an uncertain economic outlook driven by tariff risks, central banks are maintaining their current rate stance
The upcoming FOMC meeting is expected to clarify whether the outlook is dovish or hawkish, influencing both economic expectations and oil demand

Oil's recent decline aligns with a broader three-year downtrend. The ongoing debate over renewable energy adoption, OPEC’s plans to unwind supply cuts, Trump’s pro-drilling policies, and weaker demand projections due to trade war concerns reinforce a bearish sentiment across the market.

While recent price gains have been driven by geopolitical tensions and sanctions, these gains have proven unsustainable. A sustained recovery in oil prices would likely require a significant catalyst, such as trade agreements, economic stimulus measures, and improving global growth forecasts.

China continues to implement stimulus measures through the housing sector, domestic consumption, and monetary policies, as deflation concerns pose a threat to overall oil demand. Strengthening economic indicators from China will be crucial in boosting market sentiment for oil. Meanwhile, global central banks are increasingly inclined toward maintaining interest rates or implementing potential rate cuts to shield their economies from the adverse effects of trade war-induced slowdowns.

Technical Analysis: Navigating Key Levels

Oil prices remain largely range-bound, as the interplay between sanctions, peace agreements, government stimulus measures, and oversupply risks keeps the market fluctuating near a critical four-year support zone between $64 and $66. This zone represents the 50% Fibonacci retracement level of the uptrend from 2020 to 2022, during which oil prices rebounded from below $0 to above $120 per barrel.

A decisive break below the $63.80 mark could trigger further declines, aligning with the 0.618 Fibonacci level and testing the psychological $60 level. Should bearish momentum persist, oil could extend losses toward $55 per barrel.

OPEC members may face pressure from declining oil prices; however, key producers, particularly in the UAE, are actively diversifying their economies to reduce reliance on oil revenue. Notably, the UAE MSCI Index remains near its 2022 highs, despite the continued downward trajectory of oil prices since that time.

Markets remain in a holding pattern, awaiting a potential shift from trade wars to trade deals, as well as further clarity from the Federal Reserve on its economic outlook and monetary policy direction.

Crude Oil Technical Forecast: Daily Time Frame (Log Scale)

(Source: TradingView)

Following an initial rebound from the $65 support zone, oil retraced near the 0.236 Fibonacci retracement level of the downtrend from January to March 2025 at $68.50. If oil sustains gains above $68.70 and $69.20, upside momentum could push prices toward $70.80, $72.60, and $74.30.

Conversely, should oil break below the $64-$66 support zone, a sustained move beneath $63.80 may lead to further declines, aligning with the 0.618 Fibonacci retracement level and testing psychological thresholds at $60 and $55 per barrel.

Written by Razan Hilal, CMT

Follow on X: @Rh_waves

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67.6% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.