U.S. Tariffs Spark Oil Supply Worries

Traders Eye Supply Tightness and Tariff Pressures

Light crude oil is posting a solid weekly gain, closing near $69.90 on Thursday, up roughly 2.4%, as traders responded to tightening global supply and rising geopolitical risks. However, prices struggled to sustain momentum above the $70 mark, constrained by macroeconomic uncertainty and strong technical resistance. The interplay between sanctions, tariffs, and demand signals created a complex backdrop that left traders weighing both upside potential and downside risks.

U.S. Tariffs on Venezuela and Iran Trigger Supply Worries

The dominant bullish driver this week came from escalating U.S. sanctions on Venezuela and Iran. The Trump administration’s decision to impose a 25% tariff on countries importing Venezuelan crude sent ripples through the physical market. India’s Reliance Industries, the operator of the world’s largest refining complex, is halting Venezuelan imports in response, reinforcing fears of a looming supply squeeze.

Simultaneously, Washington’s renewed enforcement of Iranian oil sanctions—targeting refiners and shipping linked to China—further tightened available barrels. The combined impact from both measures threatens to cut off hundreds of thousands of barrels per day from the global market, with Chevron’s potential 200,000 bpd production loss in Venezuela adding to the pressure. Traders responded by pushing WTI through a key pivot at $69.31, now acting as support.

Inventory Draws Underscore Strong U.S. Demand

Bullish sentiment was reinforced by larger-than-expected U.S. inventory draws. API data revealed a 4.6 million barrel drop in crude stocks, while EIA confirmed a 3.3 million barrel decline—far exceeding analyst expectations. These figures suggest firm demand in the U.S. despite mixed macro indicators. Fuel stockpiles also fell, confirming that consumption remains solid even as broader economic concerns simmer.

Ceasefire Talks and OPEC+ Output Curb Further Gains

The geopolitical risk premium was softened mid-week as ceasefire negotiations between Russia and Ukraine showed tentative progress. Temporary agreements on halting attacks on energy infrastructure reduced immediate supply risks tied to Russian exports. Meanwhile, OPEC+ confirmed its intention to continue with a modest 138,000 bpd monthly output increase, but compensatory cuts by overproducing members are expected to nullify the net impact, keeping overall supply constrained.

Trade War Risks and China Demand in Focus

Demand-side concerns reemerged as President Trump announced 25% tariffs on imported cars and light trucks, fueling fears of slower gasoline demand and higher vehicle prices. While this could marginally delay EV adoption—providing short-term support for crude—it also raises broader concerns about global growth. Next week’s China PMI data is now in sharp focus, as any sign of weakness from the top crude importer could weigh heavily on sentiment.

Weekly Light Crude Oil Futures

Trend Indicator Analysis

The main trend is up according to the weekly swing chart, however, momentum is trending lower with the market trading on the bearish side of the 52-week moving average at $70.73.

Crossing to the strong side of the pivot at $69.31 is a sign of buying, but traders still face headwinds at another pivot at $70.57 and the 52-week moving average at $70.73.

Overcoming the 52-week moving average will shift momentum and could trigger an acceleration to the upside.

A dip back below $69.31 will indicate some selling pressure, but strong support appears to have been established at a series of bottoms at $65.01, $64.54 and $61.37.

Weekly Technical Forecast

The direction of the Weekly Light Crude Oil Futures market the week ending April 4 is likely to be determined by trader reaction to $69.31.

Bullish Scenario

A sustained move over $69.31 will signal the presence of strong buyers. If this creates enough near-term momentum, we could see a possible retest of $70.57 to $70.73.

Bullish traders need to watch the reaction to the 52-week moving average at $70.73. Overtaking it could trigger an acceleration to the upside and reaffirm the uptrend.

Bearish Scenario

A sustained move under $69.31 will indicate the presence of sellers. The first downside target is a minor pivot at $67.61, followed by a bottom at $65.01.

Oil Prices Forecast: Supply Risks Dominate, but Demand Signals Cloud the Path

The outlook for crude oil remains fundamentally bullish heading into next week, driven by tightening supply from U.S. sanctions on Venezuela and Iran. With key refiners halting purchases and production likely to decline further, global availability is expected to contract, particularly if Chevron winds down Venezuelan operations as planned. These constraints come at a time when OPEC+ output hikes are largely neutralized by offsetting member cuts, keeping the group’s effective supply contribution supportive of prices.

At the same time, recent U.S. inventory data confirmed strong underlying demand, with crude and product stockpiles falling well beyond expectations. This reinforces the view that domestic consumption remains firm despite macro headwinds.

However, the upside case is moderated by growing concerns over global demand. New U.S. auto tariffs threaten to raise consumer costs and potentially dampen gasoline usage. Additionally, market participants are closely watching next week’s China PMI readings for signs of economic softening. Any indication of a slowdown from the world’s largest crude importer could limit the bullish impact of current supply-side risks.

In balance, fundamentals continue to favor higher prices, but the sustainability of any rally will hinge on demand developments from major economies and further clarity on the enforcement and fallout of U.S. sanctions.

Technically, traders face some headwinds at $69.31 and $70.57, but the key indicator to watch is the 52-weekly moving average at $70.73. Trader reaction to this indicator could set the tone late next week with the possibility of an upside breakout and a shift in momentum.