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Oil Market Turns Bearish: XTI Extends Decline After Support Collapse

West Texas Intermediate (WTI) crude oil is attempting to stabilize around the 75.10 area during Thursday's Asian session after suffering five consecutive days of losses. While prices have managed to post a modest recovery, the broader market environment remains challenging as traders continue to assess the impact of easing geopolitical risks, shifting monetary policy expectations, and a potentially oversupplied global oil market.

Recent developments in the Middle East have significantly reduced the risk premium that had previously supported crude prices. According to reports, the United States and Iran have signed a preliminary memorandum of understanding aimed at ending the conflict involving Israel and Iran. The agreement includes a 60-day framework to negotiate a comprehensive peace deal, the reopening of the strategically important Strait of Hormuz, and the gradual removal of sanctions on Iranian oil exports.

The reopening of the Strait of Hormuz is particularly important for energy markets, as the route handles a substantial portion of global crude shipments. With supply disruptions becoming less likely and Iranian exports potentially returning to the market, traders have begun to reduce bullish positions that were previously built on geopolitical uncertainty.

At the same time, the Federal Reserve's latest policy decision has added another layer of pressure to commodity markets. The Federal Open Market Committee unanimously voted to keep interest rates unchanged within the 3.50%–3.75% range. However, newly appointed Federal Reserve Chairman Kevin Warsh emphasized the central bank's commitment to restoring price stability and suggested that policymakers remain open to additional rate hikes if inflation pressures persist.

Higher interest rates typically strengthen the US Dollar and slow economic activity, both of which can weigh on oil demand expectations. As a result, energy traders interpreted the Fed's tone as moderately bearish for crude prices, limiting the potential for any meaningful recovery.

Adding to the negative outlook, the International Energy Agency's latest monthly report projected a significant global supply surplus by 2027. The agency expects global oil production to increase by roughly 8 million barrels per day, driven by recovering Gulf exports and rising non-OPEC+ production. Meanwhile, demand growth is forecast to remain relatively modest at around 2 million barrels per day. This widening imbalance between supply and demand has reinforced concerns that the oil market could face prolonged downward pressure over the coming years.

Technical Analysis: XTI/USDT 4H Chart

From a technical perspective, XTI remains firmly under bearish control on the 4-hour timeframe. Price action continues to print lower highs and lower lows, confirming that sellers remain dominant across the broader market structure.

The recent breakdown below the key 79.34 support level marked a significant technical development. This level had previously acted as an important floor for buyers, and its failure accelerated downside momentum as stop-loss orders and fresh selling entered the market.

Even more concerning for bulls is the inability of the market to attract sustained buying interest within the former demand zone between 86.53 and 88.72. The rejection from this area suggests that institutional buyers remain cautious and that market participants continue to favor defensive positioning.

Momentum indicators remain weak and continue to trade below their neutral thresholds, reflecting persistent selling pressure. Although short-term oversold conditions could trigger temporary rebounds, there is currently little evidence of a broader trend reversal.

As long as XTI remains below 79.34, the bearish structure remains intact. Sellers are likely to maintain control and continue targeting lower support levels in the sessions ahead.

Key Levels to Watch

Immediate Resistance: 79.34

Major Resistance Zone: 86.53 – 88.72

First Downside Target: 72.00

Major Downside Target: 70.00

A sustained break below 72.00 could expose the psychological 70.00 level, which may serve as the next significant support area for crude oil. Conversely, if buyers manage to reclaim 79.34, a corrective recovery toward 86.53 and 88.72 could develop. However, such a move would likely be viewed as a countertrend rally unless accompanied by a broader shift in market sentiment and stronger bullish momentum.

Outlook

The combination of easing geopolitical tensions, expectations of increased Iranian oil exports, a hawkish Federal Reserve, and long-term concerns about global oversupply continues to create a challenging environment for crude oil prices. While short-term rebounds remain possible following the recent decline, the overall trend favors sellers as long as price remains below the 79.34 resistance level.

For now, traders should continue monitoring the behavior of price around key resistance zones, as any failure to reclaim lost support levels could signal another leg lower toward 72.00 and potentially 70.00 in the coming sessions.

$XTIUSD ‌