Oil Slumps as Ceasefire Kills Risk Premium

Key Takeaways:

*Oil prices extended losses after Israel and Hamas reached a ceasefire, easing geopolitical tensions and erasing the Middle East risk premium.

*OPEC+ output hit a 29-month high, led by increased exports from Saudi Arabia and Russia as production cuts are unwound.

*Iranian and Venezuelan exports are rising, amplifying the perception of a well-supplied market.

Market Summary:

Crude oil prices extended their decline this week as geopolitical tensions in the Middle East eased following the announcement of a landmark ceasefire between Israel and Hamas. The agreement, seen as a pivotal step toward regional stability, has erased much of the risk premium that had kept prices elevated in recent months. Market sentiment has turned cautious, with traders reassessing supply-demand dynamics now that a broader regional escalation appears less likely. The reduction in geopolitical tension coincides with rising evidence of ample global supply, further pressuring crude benchmarks.

On the supply side, OPEC+ output has risen to a 29-month high, driven by increased exports from Saudi Arabia and Russia as earlier production cuts are gradually unwound. U.S. crude production has also rebounded to a record 13.6 million barrels per day, and the EIA has lifted its 2025 output forecast, signaling that the supply overhang could persist. Meanwhile, global seaborne shipments from sanctioned producers—including Iran and Venezuela—continue to climb, reinforcing perceptions of a well-supplied market. These developments have weighed on technical sentiment, with WTI failing to sustain a breakout above its key moving averages and now approaching major support near $58 per barrel.

Still, structural undercurrents could prevent a deeper collapse. Stalled Ukraine peace efforts keep Russian supply constraints in place, while resilient U.S. demand offers some offset to global weakness. However, with the ceasefire deflating the geopolitical risk premium and the macroeconomic outlook softening amid the U.S. shutdown, the balance of risks leans to the downside in the near term. Traders will watch whether crude can stabilize above key technical levels or if the recent breakdown marks the start of a deeper corrective phase.

Technical Analysis 

USOIL, H4: 

WTI crude prices continued to trade under pressure, hovering near $61.60 after repeated rejections from the $64.30 resistance zone. The short-term structure remains bearish, with the price capped below the 20- and 50-period moving averages, both sloping downward and acting as dynamic resistance. The recent breakdown from the minor ascending channel reinforces selling bias, suggesting bears are regaining control after last week’s failed attempt to sustain above $63.00.

Momentum indicators confirm the weakening tone that the RSI slipped to 44, indicating fading buying momentum, while the MACD has turned flat to slightly negative, hinting at continued sideways-to-down pressure. Immediate support lies at $59.95, followed by $57.90, levels that previously triggered technical rebounds. A recovery above $63.00 would be needed to reestablish bullish traction toward $64.25.

Overall, crude remains vulnerable to further downside correction as easing geopolitical risks and persistent demand concerns overshadow supply cuts, keeping short-term bias negative unless a clear rebound above the 50-SMA materializes.

Resistance level: 61.90, 63.00

Support level: 59.95, 57.90