Brent and WTI: Quarterly Outlook

By Ion Jauregui - ActivTrades Analyst
At the end of January 2025, Brent and West Texas Intermediate (WTI) crude oil prices have shown significant movements in the global energy market. Brent is trading around $77.47 per barrel, while WTI stands at $73.81.

Economic Analysis
Several economic factors are influencing the current dynamics of oil prices:
1. economic data from China: the recent contraction in Chinese manufacturing activity has raised concerns about a possible decline in demand for crude oil, given that China is the world's largest importer.
2. U.S. Trade Policies: The Trump administration has announced the imposition of 25% tariffs on imports from Canada and Mexico, and is considering similar measures for China. These actions could affect oil imports, as Canada and Mexico are key suppliers to the United States.
3. Production Efficiency: Oilfield services companies in the U.S. face a decrease in demand for hydraulic fracturing and increased production efficiency, which has led to a reduction in the number of active rigs and could influence future crude oil supply.
4. U.S. Inventory Expectations: U.S. crude oil inventories have shown an increase in recent weeks, indicating lower consumption or an increase in production. According to the latest reports from the Energy Information Administration (EIA), stockpiles have increased by approximately 3.5 million barrels, which could put downward pressure on prices in the short term. If this trend continues, it could reinforce bearish expectations for Brent and WTI.

Technical Analysis
From a technical perspective, in the short term Brent (Ticker AT: Brent), after reaching lows since January 9, has shown a slight recovery. Immediate resistance is around $80, a level that, if overcome, could open the way for further gains. However, the inability to overcome this barrier could result in a consolidation or pullback to previous supports. The Brent price has been moving in a very high volatility range since March 18, 2023 to date with its mid-zone being $84 - $80.74 indicated by the checkpoint (POC). Looking at the chart it has pierced its uptrend on August 8, 2024, to fall to a new support zone at lows of $68.46. Looking at the 3 consecutive touches below the $95.12 high to the current price zone, it does not appear to be evolving in a bullish direction from the March and June 2022 highs. The commodity trend has been moving downward since then. Since July 29, 2024 there has been a bearish crossover of averages reversing the trend of the averages. At the moment since January 3 of this year there has been a crossover in the opposite direction and currently the 50-average has overtaken the 200-average, but the 100-average has still lagged behind. We will have to watch to see if the price pierces the indicated checkpoint again, if this is the case as a new checkpoint the next two ceilings around $88 and $91.56. In a more than likely bearish scenario, if the strong price of $70.08 is pierced it will mean that industrial production has increased to a large extent.

In the case of WTI (Ticker AT:Lcrude) it has reached a key trend line around $72.50, suggesting a possible support point. Price's ability to hold above this level could indicate a continuation of the uptrend, while a break below could signal a deeper correction.
The WTI price has been moving $79 and the $72.40 in the last period of the year, it has been similar to brent with a similar bearish tone to its European counterpart. The strong support zone is found at lows of $63.94 and $68.37. Its current average zone is around $78.88 and $72.50. Its current control point (POC) is at $72.30, so it will be necessary to observe if, despite the conflict between Donald Trump and OPEC in its lack of productivity, the production increase forecasts are fulfilled at least on the US side. If we observe the bearish context and this is fulfilled, the price could retake the $60 area, although this is also unlikely due to OPEC's disinterest in listening to an American government with a “Drill baby Drill” anthem that only Canada and in particular Alberta, its main supplier, listens to.

Future Outlook
Projections for 2025 indicate a downward trend in oil prices, with an expected average of $73 per barrel for Brent and an average of $71.50 for West Texas. This forecast is based on the anticipation of an increase in global inventories and a moderation in demand.
In summary, the Brent and WTI crude oil market is being shaped by a combination of technical and economic factors. Investors should closely monitor production trends, trade policies and global economic indicators to make informed decisions in this volatile environment.





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