Crude Collapses on OPEC+ Shock and Tariff Turmoil—Mid-$50s in Sight?

WTI Crude Oil Futures (May) 

Yesterday’s Settlement: 66.95 down -4.76 [-6.64%]

The risk-off move yesterday from President Trump’s overly aggressive tarriff decision was compounded in Crude Oil markets by a surprise supply hike out of OPEC+. Our expectations are for crude to get into the mid-$50 range on the OPEC+ supply hikes and demand hit from the slowdown in the global economy.

As I said yesterday, a U.S. recession is highly probable if not imminent with tariffs at these levels.

The following quote is from Bloomberg, whose writers described the OPEC+ output hike better than I could: 

“(Bloomberg) — For most of this decade, the OPEC+ alliance has been the world’s most stalwart defender of high oil prices. In just a few moments this week, that role reversed dramatically.

In a video conference on Thursday, the coalition of crude producers led by Saudi Arabia and Russia was expected to simply remind errant members to respect their output limits, ahead of rubber stamping its existing plan to gradually raise production.

Instead they delivered a major shock — increasing supply by three times the planned amount in May in what delegates described as a deliberate effort to drive down prices to punish the group’s cheats.”

While at Blue Line, we’re looking for prices to dip into the mid-50s, Prince Abdulaziz bin Salman, the Saudi oil minister, has stated that tripling output hikes is just an “aperitif” if overproducing countries don’t fall in line. 

If the Saudis are to get more aggressive, pricing risk goes below the $50 mark. When it comes to regulating OPEC+ members and the oil market, Saudi resolve should not be tested. We all remember what happened the last time that was tried (crude oil < 0.00).  

Today, futures are lower by -4.97 [-7.42%] to 61.98 

The shockwave from the Trump tariff announcement alongside the OPEC+ supply hikes is still roiling markets today. The magnitude of both these catalysts will make them the primary driver behind pricing of risk-assets for some time. 

China responded with a 34% tariff on all U.S. goods, and it looks like “trade war” round two is now officially on. 

OPEC+ members will likely fall in line, Kazakhstan and Iraq specifically. This would provide a much-needed bullish headline to the crude markets.  

Technical Analysis:

We shifted our bias yesterday to Bearish on the OPEC+ move and the magnitude of President Trump’s tariffs. We’re shifting to Bearish / Neutral today but are still leaning on the bearish side with a target in the mid $50’s, which is aggressive. 

Crude oil futures are now well below our major four-star support level of 63.73-64.10**** that came into play overnight. If the overnight low of 60.81** is breached, the wheels may come off this thing. A settlement above 63.73**** is desperately needed to keep this sell-off in check. 

In terms of support levels, outside of flat round numbers (55.00,50.00, etc.), there’s not much in sight that’s relevant.  

Amplified volatility is to be expected, traders should size and manage positions accordingly….