By Chris Weston Head of Research, Pepperstone
August 4, 2025
The early reaction on the crude futures re-open was to sell, and while the initial downside reaction in Brent and WTI crude was contained, it was at odds relative to the modest gains seen in S&P500 futures and other risk markets, so its unsurprising that crude is gravitating back to the flat line as we inch closer to the London session. OPEC+ weekend move to increase output by 547k barrels was well telegraphed and discounted, so the early decline spoke more to liquidity conditions and a thinned order book dynamic and a maintenance of positioning from Asia-based traders…where OPEC+ go from here with its ongoing production quota’s and monitoring attracts strong debate among energy traders, but this supply-factor is not the only game in town driving the crude futures curve, and client interactions highlight that there is also a firm focus on Russia and potential sanctions here, with its trade partners also in the spotlight, whilst inventory levels also require attention, as does the re-emergence of left-tail risk in the US and the dynamic pricing and assumptions of US economic activity.
The technical set-up on the daily timeframe appears somewhat messy and displays no obvious directional trend – that said, the 50-day moving average (in Brent crude futures) does offer some steer to those biased long of crude, with the collective using this medium-term average as a trend filter, with the average containing much of the selling pressure of late, so it does feel like an important guide for our directional assessment – however, for now, the higher timeframe overview shows a market that feels comfortable positioned around $68 to $72 with traders needing to see new intel to force a new trend or a higher volatility regime.