Prices have softened after failing to break through the 200-day moving average resistance at $62.21, with the 50-day moving average at $61.57 now being tested.
A sustained move above $62.21 could open the path toward the October 8 swing top at $62.45 and potentially extend to the long-term pivot at $63.74, which may act as a resistance or breakout trigger.
Conversely, a drop below $61.57 would point to a return of selling pressure, putting the 50% retracement level at $59.08 in focus as the next downside target.
Sanctions on Russian Oil Giants Trigger Supply Concerns
Traders remain focused on supply risks after the U.S. imposed new sanctions on Russia’s Rosneft and Lukoil, which combined account for over 5% of global crude output. These actions, aimed at pressuring Moscow over the Ukraine conflict, sparked a sharp market rally on Thursday, pushing both WTI and Brent up more than 5%. The benchmarks remain on track for a 7% weekly gain, the largest since mid-June.
The market reaction has been swift. Chinese state oil firms have suspended Russian crude purchases, while Indian refiners are reportedly scaling back imports, citing sanction-related uncertainty. Analysts warn that supply flows to India, the largest buyer of Russian seaborne oil, could be severely disrupted, although China may be more resilient due to broader sourcing options and inventories.
Backwardation Returns, Reflecting Undersupply Fears
Another key development this week is the return of backwardation in both Brent and WTI six-month spreads, reversing a brief move into contango. This structure — where near-term prices are higher than those for later delivery — indicates a shift in sentiment from oversupply to potential undersupply. Traders are increasingly willing to pay more for prompt barrels rather than wait.
