By Linh Tran, Market Analyst at XS.com
Crude oil continues to extend its recovery trend, with WTI trading around USD 63.5 per barrel while Brent moves closer to USD 67.5 per barrel. This rebound comes as the market reacts positively to U.S. crude oil inventories falling more sharply than expected, alongside the impact of winter storms in the United States that have temporarily disrupted production and transportation activities.
On the demand side, energy consumption in the U.S. remains relatively resilient, supported by a stable labor market and consumer spending that has not weakened significantly, despite monetary policy remaining restrictive. Meanwhile, China—the world’s largest driver of oil demand growth—continues to recover at a gradual pace without slipping into a deep downturn. As a result, global oil demand is not strong enough to deliver a major upside impulse for prices, but it has also not become a significant short-term drag, helping keep the oil market in a relatively balanced state.
From the supply perspective, according to the latest EIA report, U.S. commercial crude oil inventories declined by around 2.3 million barrels, a sharp reversal from the previous week’s build and well below market expectations. This development suggests that the short-term supply–demand balance has tightened, reflecting steady refinery demand and constrained barrels available to the market. In addition, winter storms in the U.S. disrupted part of domestic production, with temporary outages estimated at nearly 2 million barrels per day, equivalent to about 15% of total U.S. oil output, while also affecting logistics operations along the Gulf Coast. These factors have increased short-term supply risks and have been partially priced into oil markets.
Regarding the Federal Reserve’s interest rate decision at last night’s FOMC meeting, the Fed’s decision to keep rates unchanged, in line with market expectations, did not deliver any new shock to financial markets. More importantly, although no rate cut was implemented, the accompanying message did not signal a more aggressive tightening stance, allowing the U.S. dollar to edge slightly lower as it lacked additional support. In this environment, crude oil has not faced extra pressure from monetary factors and has been able to respond primarily to its own fundamentals, particularly inventory dynamics and short-term supply conditions.
Looking ahead in the near term, oil prices are likely to remain supported if inventories continue to trend lower and supply disruptions are not fully resolved. However, the current recovery remains cautious, as the medium-term outlook still faces risks of potential oversupply and a lack of a decisive acceleration in global demand growth. This suggests that oil prices may continue to trade within a constructive range, but a strong and sustained uptrend would be difficult to establish without additional structural support.
From a personal perspective, I believe crude oil is currently in a recovery phase driven mainly by short-term fundamental factors, with the key catalysts being declining inventories and temporary supply risks. That said, for the uptrend to become more sustainable, the market would need to see clearer improvements in demand or longer-term signals of structural supply tightening. Under current conditions, oil prices may remain supported, opening the door for WTI to move toward the USD 65 per barrel area and Brent toward USD 69.5 per barrel.
Nevertheless, medium-term downside risks remain present and warrant close monitoring. Global oil demand prospects are still not fully convincing, particularly amid ongoing uncertainties surrounding economic growth in China and Europe. Moreover, current supply disruptions – such as those caused by extreme weather – are largely temporary and could be resolved relatively quickly, allowing oversupply pressures to re-emerge as production recovers. In addition, the possibility that the Fed keeps interest rates elevated for longer than expected could indirectly weigh on growth prospects and energy demand. Should these risks materialize simultaneously, the current oil price recovery could stall or reverse, rather than evolve into a sustained uptrend.