Crude oil futures have settled at $63.96, an increase of $1.31 or 2.09%. This price is within a swing area ranging from $63.61 to $65.27.
The 100-day moving average is set at $64.73, presenting a notable level within this range. Earlier in the week, prices dipped below this moving average, staying beneath it for the past three trading days.
Key Risk Levels
The moving average and swing area serve as risk-defining levels in the short term. A rise above these levels could signal further upward momentum after the recent decline.
With crude oil futures now inside the key swing area between $63.61 and $65.27, we see this as a critical decision point for the market. The immediate test will be whether prices can overcome the 100-day moving average at $64.73. A failure to break above this level could see the recent downward pressure resume.
This price jump is supported by the latest Energy Information Administration (EIA) data from this week, which showed a surprise crude inventory draw of 3.1 million barrels. Analysts had been expecting a small build, so this larger-than-expected draw suggests demand is currently outpacing supply. This fundamental data point gives credibility to a potential break to the upside.
However, we are also weighing bearish demand signals from overseas, particularly with China’s manufacturing PMI for July 2025 coming in slightly below expectations. This raises concern about future energy consumption in the world’s largest oil-importing nation. This underlying worry about global growth is likely what’s keeping prices from rallying more aggressively.
Market Strategy
Adding to the uncertainty, we note that OPEC+ chose to hold production quotas steady at their meeting earlier this month. This disciplined supply management has put a floor under prices, but the refusal to cut further suggests they are comfortable with prices in this mid-$60s range for now. Traders should not expect a bailout from the cartel in the short term.
Looking back, we remember the extreme volatility of 2022-2024, when prices swung from over $120 to the low $70s based on geopolitical events and post-pandemic demand shifts. While the current market is calmer, that history shows how quickly a breakout from a key technical area like this can lead to a significant trend. We must therefore be prepared for a larger move once this range is broken.
Given this tension between bullish inventory data and bearish demand forecasts, option traders could consider strategies that capitalize on a breakout from this zone. We believe setting up straddles or strangles could be effective to play the expected increase in volatility. Alternatively, one could establish bull call spreads with a strike above $65.27 or bear put spreads with a strike below $63.61 to define risk while positioning for a directional move.
