Oil prices stabilize at the critical level of 57; only a breakthrough of 59 can be considered a rebound.

Monday WTI crude oil rose by 1.58%, closing above $57.0, and briefly touched $58.45. It may not seem like much, but this level is critical—because the entire rebound’s critical point is at $59.0.

Geopolitical risks are escalating, and the “support” for oil prices is strengthening

Russian Foreign Minister Lavrov revealed early Monday that Ukraine used 91 drones to attack Putin’s residence, all of which were shot down. Russia has identified targets and timing for retaliation. Zelensky immediately denied, claiming it was false fabrication aimed at finding an excuse for continued military action against Ukraine.

What does this mean? A ceasefire between Russia and Ukraine remains far off. An indefinite ceasefire = continued sanctions on Russian oil = global crude oil supply remains suppressed. This is the bottom support for crude oil prices.

The prospects for peace talks are even more chaotic. Ukraine’s proposed 20-point peace plan includes ceasefire, security guarantees, and standing forces, but territorial issues and the operation of the Zaporizhzhia nuclear power plant have become insurmountable gaps. Russia outright refuses Ukraine’s maintenance of 800,000 standing troops—directly conflicting with the goal of “demilitarization.” Zelensky also firmly refuses to withdraw troops from Donbas. Rough estimates suggest negotiations could drag on for several more months.

Another uncertain factor: US military actions against Venezuela

Trump announced Monday that the US launched its first land strike against Venezuela, targeting a large facility. He previously hinted that the scope of strikes would extend beyond maritime targets to land. In October, he authorized the CIA to conduct covert operations in Venezuela.

If US forces actually strike Venezuela’s oil production facilities, supply-side threats will intensify, adding further upward momentum to crude oil prices.

Subtle shifts in supply and demand dynamics

On the surface, the International Energy Agency (IEA) expects a global crude oil surplus of 4.09 million barrels per day in 2026, making it seem difficult to reverse the oversupply. But a key variable here is: OPEC+ will pause production increases in Q1 2026.

More importantly, demand-side potential is rising. The market generally expects US tariffs to ease next year, the Federal Reserve to maintain rate cuts, and the US economy to recover. Morgan Stanley suggests a possible “productivity boom with no employment”—productivity increases while the labor market remains weak, suppressing wage growth and inflation, yet supporting steady economic growth. The result could be core inflation falling below 2%, paving the way for the Fed to cut rates significantly further.

A weakening dollar combined with stimulative policies, along with China—one of the world’s largest energy consumers and a major producer of rare earths and precious metals—having an increased probability of economic recovery. The release of demand signals that crude oil implies a global energy consumption outlook on the rise.

What does all these variables combined mean? The crude oil market is shifting from “severe oversupply” to “supply constraints and demand recovery.” This change in expectations is likely to drive a significant rebound in oil prices.

Technical analysis: Breaking through $59.0 is the real turning point

The WTI daily chart shows crude stabilizing above $57.0, with the AO indicator indicating increasing bullish momentum. This suggests that the downward trend since June is facing correction pressure.

Key levels are clear:

• Upper target: If WTI breaks through and stabilizes above $59.0, it may continue rebounding to challenge $61.5, or even push toward $64.5.
• Downside risk: If it falls below $57.0, the decline could extend further.

The current range (around $57–$58.5) is a consolidation phase. Breaking $59.0 is a confirmation of a rebound signal; otherwise, it’s just a minor correction insufficient to change the overall trend.