Is crude finally breaking out?
Crude oil was weaker in early trade, pulling back from levels last seen in mid-October. This followed an impressive rally which began on Friday 27th December. This saw front-month WTI break out from a longstanding downtrend which can trace its origins back to September 2023, punctuated by a series of lower highs and lower lows. But the early weakness quickly evaporated on the sudden fall in the US dollar. The Dollar Index dropped on renewed tariff threats from the incoming Trump administration, leading to a sharp rally in dollar-denominated commodities and other financial assets. Oil prices have rallied a long way in a relatively short period of time. Yet last year, buyers were repeatedly disappointed as every rally attempt was quickly blocked. Could things be different in 2025? It’s certainly possible from a technical perspective, even if there’s been no obvious improvement in the fundamental picture. The daily MACD is back in positive territory and pointing up, suggesting that momentum has turned positive. The next big test for front-month WTI is the $75 region, which is only a dollar away. But it may be that prices need to back up and consolidate before they can attempt another significant move higher.
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