USO ETF stock: here’s why the crude oil price could crash further

The United States Oil Fund, LP (USO), which tracks the price movements of WTI light, sweet crude oil, remains under pressure as the ongoing US-China war weighs on financial markets. It continues to trade below the previously steady support zone of $70 since dropping below it in early April. 

This is as WTI oil price lacks enough bullish momentum to rebound past $65; a level that had offered steady support to the asset for four years. Similarly, Brent oil, the benchmark for global oil appears to reach its largest monthly loss since August 2022. 

In the ensuing sessions, the focus will be on developments related to the US-China trade tensions as well as China’s efforts to support its economy. US economic data and deliberations from the OPEC+ meeting on 5th May are influential factors. 

US-China trade war dampens oil demand outlook

President Trump’s aggressive tariffs have had far-reaching impacts with investors concerned that the policy will slow the country’s economic growth. Indeed, in its latest report, the International Monetary Fund (IMF) predicted that the US economy will expand by 1.8% in 2025 compared to 2.8% in the previous year. 

Additionally, the US trade policy may slow global economic growth from 3.3% in 2024 to 2.8% in 2025. According to the institution, “The swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity”. 

Financial markets are particularly concerned by the ongoing China-US trade war. Earlier in April, Trump’s administration paused its reciprocal tariffs imposed on its key trading partners. However, it went on to enact levies of up to 145% on most US imports from China. 

The Asian country has since retaliated by imposing 125% tariffs on US goods. Besides, Beijing has refuted claims that it is nearing a deal with the US. It maintains that Washington has to cancel all the unilateral tariffs to allow for negotiations. Even so, investors view Beijing’s move to exempt some US goods from its retaliatory levies asa willingness to reach a deal.  

The standoff between the two leading economies, and its projected impact on the global economy, has dampened the crude oil demand outlook; making it tough for USO ETF price to break the resistance at $70 per barrel.   

Read more: BP Q1 earnings fall short; analysts cite strong downstream, weak oil, rising debt

Crude oil prices find support in inventory data

Despite the bearish sentiment, the market is decent. Data released by the Energy Information Administration (EIA) for the week ending April 18th exceeded expectations for the first time in three weeks. Compared to the expected surge of 1.6 million barrels, inventories only rose by 0.2 million barrels.

At the same time, Chinese traders are taking advantage of the lower crude oil prices to stock up. According to Kpler, which tracks oil tankers entering China, the country is importing about 11 million bpd. This is the highest figure in one and a half years and a significant surge from January’s 8.9 million bpd. The country is the leading importer and second-largest consumer of crude oil worldwide. 

Market awaits fresh cues from economic data, OPEC+

While USO and the broader crude oil market follows developments on the ongoing China-US trade war, crucial US economic data slated for this week will shed some light on the impact of Trump’s aggressive tariffs. More specifically, the focus will be on PCE figures on Wednesday and jobs report on Friday. 

Besides, the Organization of Petroleum Exporting Countries and its allies (OPEC+) is expected to meet early next week on 5th May. The group agreed to gradually increase their output in coming months. Indeed, during their April meeting, it decided to add 411,000 bpd to the market in May. This figure equates to three monthly allocations in its prior output plan. In next week’s meeting, investors will be keen on OPEC+ decision for June. 

Read more: Here’s why the Brent crude oil price could crash below $50 soon

USO ETF stock analysis

The daily chart shows that the USO ETF stock has crashed in the past few weeks. It dropped from a high of $84.3 to the current $64. It has moved below the key support at $65.9, its lowest swing on September 6.

The stock has moved below all moving averages, a sign that bears are in control for now. Therefore, the outlook for the United States Oil Fund is bearish, with the next point to watch being at $58, the lowest level in May 2023. This view is in line with our last crude oil forecast.