Oil Likely To Sell Back To $64/bbl Per Technical Chart Analysis
The latest headlines have oil traders buzzing about Israel's strikes on Iranian nuclear facilities, sending crude prices spiking 7% on Friday. But if you've been following the charts like I have, this geopolitical noise shouldn't distract you from what the technical picture has been telling us for months – oil's headed lower, and that $64 target is still very much in play.
Let me walk you through what's really happening beneath all the Middle East drama.
The Parallel Channel Tells the Real Story
Looking at the daily chart of WTI crude, we've got a textbook descending parallel channel that's been governing price action since early 2024. This isn't some random support and resistance – it's a well-defined technical structure that has repeatedly proven its validity.
The upper pink trendline has acted as dynamic resistance, connecting the major swing highs and creating a clear ceiling for any bullish attempts. Every time oil has tested this upper boundary, sellers have stepped in with conviction. Those red arrows on the chart mark three distinct rejection points where price bumped its head against this resistance and retreated.
Meanwhile, the lower pink trendline has provided reliable support, with the green arrows marking where buyers have consistently emerged to defend this level. This parallel structure creates a clear roadmap for oil's price action – and right now, that roadmap points lower.
History Repeats: Geopolitical Spikes Fade Fast
Here's what most traders miss about Middle East tensions and oil prices: the initial spike rarely sticks. We've seen this movie before, and it usually ends the same way.
Remember September 2019 when drones attacked Saudi Arabia's Abqaiq facility? Oil prices initially spiked, but within two weeks they were back to pre-attack levels once markets realized the actual supply disruption was minimal. The Iran-Israel tensions we've witnessed over the past year have followed a similar pattern – sharp initial reactions followed by steady declines as reality sets in.
The current situation, while certainly dramatic, hasn't disrupted actual oil flows. Israel avoided targeting Iran's energy infrastructure, including the critical Kharg Island terminal that handles 90% of Iran's crude exports. Until we see real supply disruptions – not just the threat of them – these geopolitical premiums tend to evaporate quickly.
What's different this time is that the fundamental backdrop is much weaker than during previous Middle East crises.
Supply Surge Meets Demand Destruction
While headlines focus on geopolitical risk, the real story is unfolding in supply and demand fundamentals – and both are working against higher oil prices.
OPEC+ has been steadily unwinding their production cuts, adding 411,000 barrels per day in recent months. The group is accelerating their plan to bring back the 2.2 million barrels per day they've been holding off the market. Saudi Arabia, despite being the largest producer, is still pumping below its full quota, meaning there's even more supply ready to hit the market if needed.
This supply increase comes at the worst possible time for oil bulls. The U.S. economy is showing clear signs of deceleration, with the International Energy Agency slashing its 2025 oil demand growth forecast by 400,000 barrels per day due to trade tensions and economic uncertainty. When you combine rising supply with falling demand, the path forward becomes pretty clear.
Morgan Stanley expects global growth to weaken to just 2.9% in 2025, while the Conference Board warns that tariffs could "substantially lower GDP growth" and "weaken the labor market." This isn't the kind of economic backdrop that supports sustained higher oil prices.
The Technical Target: $64 and Beyond
Now let's get back to what the chart is actually telling us. The recent rejection from the upper parallel channel resistance has triggered the next leg down, and our technical target sits at $64 per barrel – marked by that white horizontal line on the chart.
This isn't just some arbitrary number. It represents a confluence of technical factors, including the measured move from the recent high and the probable landing zone based on the channel's trajectory. More importantly, it aligns with the fundamental picture of oversupply meeting weakening demand.
The beauty of parallel channels is their predictability. Price tends to oscillate between the boundaries until it breaks down, and when it does break, the moves can be swift and decisive. Given the current fundamental headwinds, I wouldn't be surprised to see oil test and potentially break below the lower channel support.
Risk Management in Volatile Times
Of course, any trader worth their salt knows that geopolitical events can create temporary disruptions to even the most reliable technical patterns. The key is distinguishing between noise and signal.
If Iran were to actually close the Strait of Hormuz – through which 30% of seaborne oil trade flows – we could see a genuine supply shock that sends prices well above $100. But every expert I've researched agrees this scenario remains unlikely. Iran's economy depends heavily on oil exports, and blocking the strait would be counterproductive to their relationship with China, their primary customer.
The invalidation point for this bearish outlook would be a sustained break above the upper parallel channel resistance with strong volume confirmation. Until that happens, the technical structure remains intact, and the path of least resistance is lower.
Psychology of Fear and Greed
What we're witnessing right now is a perfect example of how fear can temporarily override technical analysis. The initial 7% spike on Friday was pure emotion – traders reacting to headlines rather than fundamentals. But as the dust settles and rational analysis returns, prices are already pulling back from their highs.
This is human nature at work. Major tops are often created when bullishness reaches its peak, while major bottoms form during periods of maximum pessimism. The current geopolitical fear, paradoxically, may be creating the very conditions that lead to lower prices as the fundamental picture reasserts itself.
Smart money understands this dynamic. They buy fear and sell greed. Right now, with oil trapped in a descending channel and fundamental headwinds building, the smart money is positioning for lower prices, not higher ones.
Looking Ahead
The next few weeks will be telling. As the geopolitical premium fades – and history suggests it will – the underlying technical and fundamental weaknesses should reassert themselves. OPEC+ production increases will continue hitting the market just as economic growth concerns intensify.
For traders, this creates a compelling risk-reward opportunity. The technical structure provides clear levels for entries and stops, while the fundamental backdrop supports the bearish thesis. The $64 target represents our initial objective, but don't be surprised if we see additional weakness beyond that level.
Remember, successful trading isn't about predicting every headline or geopolitical twist. It's about understanding the underlying currents that drive markets over time. Right now, those currents are flowing toward lower oil prices, regardless of what's happening in the Middle East.
The parallel channel has been our guide for months, and it's not done teaching us lessons yet. Sometimes the best trades are the ones that seem obvious in hindsight – and this descending channel in oil is setting up to be one of those trades.
Stay disciplined, stick to the technical levels, and let the market show you where it wants to go. The chart has been remarkably clear about oil's direction. Now it's just a matter of patience and proper position sizing as we wait for the $64 target to be reached.
