USO ETF price analysis: Is the oil demand optimism sustainable?

The United States Oil Fund (USO), which tracks the price movements of light, sweet crude oil, began the week on its front foot despite OPEC+ surprise outpuk hike. As highlighted by the alliance of petroleum exporting countries and their allies, the market appears capable to absorbing more barrels. 

Even with the persistent trade tensions, the producers are optimistic about healthy road mobility, especially during the current summer season in the Northern Hemisphere. However, the recorded gains are capped by concerns on oversupply in coming months. 

Demand optimism overrules oversupply concerns in the short term 

On Saturday, nations within the OPEC+ alliance agreed to increase their collective crude oil output by 548,000 bpd. The group, which comprises major producers like Saudi Arabia and Russia, was expected to approve a lesser amount of 411,000 bpd. The OPEC Secretariat supported the nations’ decision by pointing to “a steady global economic outlook and current healthy market fundamentals”. 

As part of OPEC+’s positive economic outlook, the officials are optimistic of the Northern hemisphere’s summer season that usually marks the region’s peak fuel demand. In fact, USO price has been on a rebound after oil stockpiles at the Cushing storage hub dropped by 1.4 million barrels for the week ending on 27th June. This was the highest drop since January 2025, despite the country’s oil inventories increasing beyond expectations.

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

As the crude oil market remains tight, oil producers are confident that the additional barrels will find buyers, at least in the short term. For instance, Saudi Arabia raised its main crude grade’s prices for Asian buyers starting from August. Saudi Aramco, the state producer, is set to increase the Arab light crude’s price to $2.20 a barrel; up by $1. This figure is higher than the expected increase of 65 cents per barrel, which points to the kingdom’s confidence about the global oil demand outlook. 

However, with the persistent trade tensions, potential oversupply, and the summer season being short-lived, analysts expect the bullish momentum to dwindle in coming months. Goldman Sachs forecasts that Brent oil will average at $59 per barrel in Q4’25 and $56 per barrel next year. In comparison, JP Morgan expects the benchmark for global oil prices to trade between the low-to-mid $60s in 2025 and $60 in 2026.

USO price technical analysis

On Monday, USO price reversed the losses recorded late last week to trade at a two-week high of $76.30 as at the time of press. Since plunging from its 5-month high in late June, it has rebounded by over 5%. This is in reaction to the significant drop in stockpiles at the Cushing storage hub and optimism over the global oil demand.

Notably, the bullish golden cross pattern remains in place since its formation in early June. However, I expect USO price to enter a consolidation phase amid concerns on oversupply in coming months. In the short term, the 20-day EMA at $74.50 will likely offer support to the asset as it finds resistance at $76.76. With heightened optimism, the bulls may have an opportunity to retest the upper resistance zone of $77.50.