Crude oil prices face a dilemma: US-China trade easing vs. global oversupply, with the $60 mark becoming the focal point

Technical Signals Reveal Clues: Consecutive “Doji” Patterns Clearly Indicate

From the daily chart, WTI crude oil has been oscillating within a narrow range of $60.0-$62.5, which is not random fluctuation but a sign of serious disagreement among market participants about the future direction. Two consecutive trading days closed above $60 with “Doji” patterns, indicating that the forces of bulls and bears are approaching balance. However, this balance often foreshadows imminent intense volatility.

Traders should focus on two key support lines: if the oil price stabilizes above $62.5 and breaks upward, it could challenge $65 and even target the $70 region; conversely, if it effectively breaks below $60 support, the next critical support will fall back to $56. Currently, crude oil is at a critical point. A relatively clear policy signal or supply-demand data could break this deadlock.

Federal Reserve Policy Uncertainty, Market Expectation Management Faces Turning Point

This Thursday, the Federal Reserve cut interest rates by 25 basis points as scheduled, but the key of this decision lies not in the rate cut itself but in the statement about future policy directions. Fed Chair Powell explicitly stated that whether to continue rate cuts in December “remains to be seen,” immediately disrupting the market’s firm expectation of “three rate cuts this year.”

According to real-time data from CME futures, the probability of a 25 basis point rate cut in December remains at 74.7%, while the chance of holding rates steady is 25.3%—meaning a quarter of market participants are already preparing for a policy shift. Meanwhile, the US dollar index hit a three-month high of 99.7, just one step away from the psychological level of 100, which is often directly related to risk assets being under pressure.

While the Fed’s halt to balance sheet reduction (QT) indeed provides liquidity to the market, Powell also emphasized that inflation remains above the 2% target and the economy is expanding modestly—classic “hawkish rate cut” signals. Investors must recognize that although the Fed is releasing liquidity, its commitment to price stability remains firm. This policy ambiguity has directly dragged down risk assets including crude oil. The fact that Meta’s stock plunged 11.3% further intensified market concerns over the sustainability of high tech spending in AI.

Implicit Significance of US-China Trade Truce: Demand Outlook Quietly Changes

The substantive outcome of the US-China leaders’ meeting appears ordinary, but the change in market expectations it brings is not to be underestimated. US tariffs on China were reduced from the originally planned 57% to 47%, with the 24% reciprocal tariffs suspended for another year, and export control rules postponed by a year—these seemingly technical adjustments actually add six months of certainty to global trade stability.

More importantly, China committed to purchasing 12 million tons of US soybeans this planting season and an additional 25 million tons annually over the next three years. This procurement volume could reshape the global agricultural trade landscape. China’s potential export recovery suggests a possible improvement in demand for raw materials and energy. Given the high sensitivity of the oil market to macro demand, this trade easing signal could provide medium-term support for crude oil prices.

Supply-Demand Imbalance Unresolved, Saudi Fiscal Dilemma Worsening

However, the story of demand improvement must be contrasted with the reality of global supply. Saudi Arabia’s latest fiscal data shows the third-quarter deficit expanded to 88.5 billion riyals ($23.6 billion), a 160% increase from the previous quarter, despite oil revenue decreasing slightly by 0.1% to 150.8 billion riyals. This data exposes OPEC+'s awkward position: oil income is declining while expenditures are rising, and deficits are widening.

This is a direct consequence of OPEC+'s gradual easing of production cuts—while increased output alleviates fiscal pressure, it also suppresses oil prices. The global crude oil market remains oversupplied, which is the fundamental reason for downward pressure on prices. Even if US-China trade easing stimulates demand, the current ample supply situation makes it unlikely for demand growth to push oil prices to levels satisfying investors.

Conclusion: Direction Approaching, Mid-term Rebound Still Possible

Considering policy, trade, and supply-demand dimensions, WTI crude oil currently faces a situation where “upward breakout requires stronger demand support, downward pullback needs substantial supply-side changes.” Trade easing has improved demand outlook expectations, but Fed policy ambiguity and oversupply in oil form a ceiling.

In the next six months, assuming US-China tariffs stabilize around 47%, the Fed cuts rates in December (74.7% probability), and the Russia-Ukraine conflict remains deadlocked, there is a possibility of a slight upward shift in the oil price range. However, the height and sustainability of such a rebound ultimately depend on whether global economic growth can truly stabilize, which is the biggest current market uncertainty. Traders should patiently wait for breakout signals above $60 or $62.5 rather than prematurely taking sides.