Crude Oil: Navigating Trade Tensions and Technical Levels Ahead of US-China Talks

As crude oil prices hover near $65 per barrel, investors are bracing for a pivotal week of US-China trade talks that could redefine near-term price trajectories. With geopolitical risks, OPEC+ supply dynamics, and shifting macroeconomic indicators all in play, the path forward for crude hinges on whether traders can sustain optimism amid technical overhangs and supply-demand imbalances.

Technical Crossroads: Resistance at $65 and the 200-Day Moving Average

Crude oil prices have been inching toward critical resistance levels in early June 2025. As of June 6, WTI settled at $64.60, within striking distance of the $65 psychological threshold. However, the 200-day moving average (DMA) remains a formidable barrier, currently anchored near $63 for WTI and $66 for Brent. Technical analysts note that the 50-day MA has been steadily diverging from the 200-day MA, a bearish divergence suggesting downward pressure.

The Ichimoku cloud, a multi-layered technical indicator, further underscores caution. For both benchmarks, the price is trading below the cloud's lower boundary, and the tenkan-sen (9-period MA) has dipped below the kijun-sen (26-period MA), signaling a short-term downtrend. Traders will watch whether prices can break above the cloud and sustain momentum.

Geopolitical Crosscurrents: Trade Talks, Rare Earths, and OPEC+ Supply

The US-China trade negotiations, set to intensify in early June, are the linchpin for market sentiment. While rare earths and semiconductor disputes dominate headlines, the ripple effects on energy markets are indirect but significant. China's control over 60% of rare earth production and 90% of refining capacity gives it leverage to disrupt global supply chains for industries like EV manufacturing—sectors that indirectly drive crude demand through logistics and refining activity.

A breakthrough in talks could ease fears of tariff escalation, supporting global growth and crude demand. However, failure to resolve core issues—such as China's rare earth export restrictions or US semiconductor controls—could reignite trade wars, spurring a renewed selloff in commodities.

Meanwhile, OPEC+'s decision to incrementally add 411,000 bpd of supply since June 2025 has already dampened bullish sentiment. While this increase is modest compared to the 2.2 million bpd cut unwinding, it risks exacerbating oversupply concerns if demand falters.

Macroeconomic Fundamentals: Jobs Data and Demand Resilience

The May US jobs report, showing a net gain of 139,000 nonfarm payrolls, offers a mixed outlook for crude demand. While employment growth in healthcare, leisure, and hospitality sectors bodes well for energy-intensive services, the downward revisions to prior months' data and a declining labor force participation rate hint at underlying economic softness.

The key metric for crude bulls is wage growth: hourly earnings rose 3.9% year-over-year, a rate that could sustain consumer spending and industrial activity. However, the Federal Reserve's “wait-and-see” stance on rate hikes adds uncertainty, as higher interest rates could weaken the dollar—a dual-edged sword for oil (which is priced in USD).

Speculative Dynamics: Long Positions and Volatility Risk

Speculative activity has been a tailwind for crude prices. As of early June, speculative net long positions in WTI futures surged to 163,078 lots, with a 42,496-lot increase in the prior week. This speculative fervor has pushed prices higher, but it also amplifies volatility. A failed trade deal or a technical breakdown below $60 could trigger profit-taking, leading to sharp declines.

Investment Strategy: Balance Momentum with Caution

1. Buy the Dips Near Support: Traders bullish on a US-China deal resolution might consider accumulating WTI dips near the $60–62 support zone, with the $65 resistance as a first target.
2. Hedge Against Downside Risk: Investors with longer time horizons could use put options to protect against a retest of the 2024 lows near $55, particularly if OPEC+ supply additions outpace demand recovery.
3. Monitor Rare Earth Talks Closely: A breakthrough by the August 14 deadline could unlock a $70+ price level, while a stalemate may push prices toward $55.

Final Take

Crude oil faces a critical inflection point as traders weigh geopolitical risks, technical barriers, and macroeconomic data. While near-term optimism around trade talks and moderate jobs growth supports a bullish bias, the path to sustained gains remains fraught with uncertainty. Investors must stay agile, leveraging technical levels and geopolitical developments to navigate this volatile landscape.