Oil Prices Advance as US Inventories Shrink, Geopolitical Risks Mount

Commodity

Summary:

WTI crude oil rallied towards $70 as falling US inventories and Trump's threat of secondary tariffs on Venezuelan oil buyers tightened supply expectations.

BUY WTI

Close Time

CLOSED

69.700

Entry Price

71.000

68.000

57.533 +0.300 +0.52%

130.0

Pips

Profit

68.000

71.000

Exit Price

69.700

Entry Price

71.000

West Texas Intermediate (WTI) crude oil prices continued to firm during the early hours of Friday’s Asian session, climbing to $69.70, the highest level seen in nearly a month. The move comes amid a potent mix of supply-side tailwinds and geopolitical risks, leaving the market delicately balanced between bullish inventory draws and bearish demand threats.

The latest catalyst fueling the rally has been the renewed threat of tariffs from former President Donald Trump, who announced a 25% secondary tariff on countries that continue to purchase Venezuelan oil and gas. The measures, set to take effect on April 2, are designed to cripple Venezuela's already strained oil-dependent economy but have inadvertently tightened supply expectations in the global crude market. According to US Commerce Department data, the US imported approximately $5.6 billion worth of oil and gas from Venezuela in 2024, ranking it among the largest foreign suppliers to the United States last year.

The market was quick to interpret Trump’s aggressive stance as a bullish factor for crude, potentially reducing Venezuelan exports globally, at least temporarily. This comes on top of pre-existing supply tightness that has been brewing since early March.

Adding further support, the US Energy Information Administration (EIA) reported a much larger-than-expected decline in domestic crude inventories. For the week ending March 21, crude stockpiles fell by 3.341 million barrels, sharply contrasting the previous week’s 1.745 million-barrel build. Market participants were only expecting a drawdown of around 1.6 million barrels, underscoring stronger-than-anticipated demand or tighter supplies.

While the supply-driven rally is gaining traction, sentiment remains fragile as markets weigh the broader implications of Trump’s wider tariff agenda. Of particular concern is his decision to impose a 25% tariff on imported cars and light trucks beginning April 2, with additional levies on auto parts scheduled for May 3. The auto sector is a significant consumer of refined oil products such as gasoline and diesel, and any disruption to production or demand in this industry could reverberate through the entire energy complex.

“The biggest headwind for oil right now is the concern about tariffs, and whether they might slow demand,” one trader commented, reflecting a cautious tone seen across commodity desks globally. The dual impact of tariffs — restricting supply on one hand while risking demand destruction on the other — creates a complicated trading landscape.

Technical Analysis

From a technical standpoint, WTI crude has posted a convincing recovery from recent lows and is now attempting to decisively breach the psychological $70.00 barrier. The short-term trend remains upward, aided by the price's sustained movement above its 50-candle Simple Moving Average (SMA) on the intraday chart. The correctional uptrend is clearly dominating, suggesting that momentum has shifted in favor of the bulls for now.

The rally has been fueled by positive momentum accumulation, with traders appearing to bet on further supply-side disruptions and seasonal demand picking up as we head into the second quarter. However, failure to secure a clean breakout above the $71.00 handle could leave the commodity vulnerable to profit-taking, especially if macroeconomic concerns surrounding tariffs and slowing global growth intensify.

TRADE RECOMMENDATION

BUY WTI

ENTRY PRICE: 69.70

STOP LOSS: 68.00

TAKE PROFIT: 71.00

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Oil Prices Advance as US Inventories Shrink, Geopolitical Risks Mount

Technical Analysis

Risk Disclosure