Crude oil price analysis: Persistent risk aversion shapes short-term trend

Crude oil price hit a fresh 5-month low on Tuesday despite starting the week on recovery mode. The benchmark for global oil price- Brent has held below the support-turned-resistance zone of $64 since Friday last week, following renewed trade tension jitters. 

While investors are hopeful of fruitful talks between the US and China, there are persistent concerns on the impact of the current tit-for-tat on the global economy and oil demand growth. This points to further price volatility in the ensuing sessions. 

In addition to the US-China trade relations, the market is eyeing CPI data from the two leading economies. The figures come amid concerns over a supply glut and slow global demand growth. Interestingly, OPEC is still optimistic on crude oil demand in the current and next year.    

IEA report confirms bearish trend

The benchmark for global crude oil price, Brent has plunged by closer to 20% year-to-date. Notably, it has been under heightened selling pressure in recent months; largely trading below the once steady support zone of $70 a barrel since April. This period coincides with OPEC+ decision to increase production after years of supporting the market through voluntary output cuts. 

OPEC+ increased output, coupled with sluggish global economic growth, has supported a bearish outlook for crude oil prices. The risk aversion is set to continue, at least in the short term, following the renewed US-China trade tensions. 

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In its latest oil market report, the International Energy Agency (IEA) has trimmed its 2025 demand growth forecast by 30,000 bpd citing a harsher macro climate. However, as oil use remains subdued in the current and next year, supply is set to increase by 3 million bpd in the remainder of 2025. In the coming year, IEA expects output to increase by an additional 2.4 million bpd. In contrast, OPEC forecasts a more balanced market with strong demand that matches supply. 

Brent crude oil price technical analysis

Crude oil price chart | Source: TradingView

On Tuesday, Brent crude oil price reversed the gains made at the start of the week to hit a fresh five-month low. At the time of writing, the asset was trading at $62.16 after rebounding slightly from the intraday low of $61.53.

Notably, high volatility is expected in the ensuing sessions even as crude oil price remains under selling pressure. As seen on its daily chart, the short-term 25-day EMA has remained below the medium-term 50-day EMA since early August when it formed the bearish death cross pattern. In the short term, Brent oil price will likely remain below the crucial support-turn-resistance zone of $64.

More specifically, the range between the support at $61.97 and the resistance level of $64.46 will be worth watching. Even with a possible rebound, the gains will likely be curbed along the 25-day EMA at $65.90 as the selling pressure persists. On the flip side, a further decline will activate the support at $61.