Oil Prices Surge as Market Shows Signs of Recovery

After several months of declining prices and bearish trends, oil has recently shown a surprising rebound. The United States Oil Fund USO has surged over 7% in the past week, marking its best performance in months. This raises an important question: Is the bottom finally behind us?

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Technical Indicators Reveal Mixed Signals

Despite this recent upswing, the oil proxy, USO ETF, has significant challenges ahead. Currently, it is trading below its 20, 50, and 200-day simple moving averages (SMAs), indicating a bearish trend. Specifically, the price remains just beneath the 200-day SMA on an annual chart. Should buying pressure and positive momentum continue, analysts suggest we could see a significant breakthrough above long-term resistance levels.

Smart Money Is Buying

On the fundamental side, market dynamics are shifting as savvy investors recognize new opportunities. Energy investor Josh Young notes that we are witnessing “the highest level of smart money buying oil since 2020.”

As highlighted by Against All Odds Research, “Crude oil looks dead to most people. But commercials—the professionals in this market—are quietly accumulating.” This insight suggests that deeper market forces may be at work.

Geopolitical Factors at Play

Several geopolitical factors are influencing this market shift. U.S. sanctions on Chinese buyers of Iranian oil have placed additional pressure on global supply. Moreover, deeper cuts in oil production from Iraq and Kazakhstan are further tightening supply. At the same time, declining gasoline and distillate inventories signal that demand remains stable, even in the face of an unexpected increase in crude stockpiles.

Though demand growth has slowed compared to previous years, with trade war concerns and economic uncertainty lingering, current trends indicate that value buyers are stepping into the market—and prices are beginning to reflect that.

Potential for Price Recovery

A rebound toward the $75–$80 per barrel range is conceivable, depending on whether key support levels can hold. If they do, oil may be on the verge of a notable recovery.

In summary, while the outlook for oil may be complicated, it is far from being a lost cause.

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Image: Shutterstock/Andreas Vogel