Oil Prices Rebound, but Break-Even Worries Linger for US Producers

• Oil prices recovered despite initial concerns from weak Chinese retail sales data.
• Goldman Sachs raised its global oil demand forecast for 2025 and 2026.
• Technical analysis indicates potential resistance and support levels for Brent Crude

Oil prices have staged a decent recovery as the day has progressed following renewed demand concerns to start the week. Oil prices faced pressure on two fronts in early trade as lackluster retail sales data from China weighed on sentiment.

Chinese Data and Moody’s Downgrade

Retail sales, which reflect consumer spending, grew by 5.1% in April, slowing from 5.9% in March and falling short of the 5.5% forecast. Economists blame the slowdown on U.S. tariffs affecting consumer confidence and weak domestic demand.

This was further compounded by a Moody’s downgrade of the United States from AAA to Aa1, raising concerns around the US economic outlook. This comes after last week’s US data hinted at a potential slowdown. Consumer confidence data from the US also painted a dour picture. However, there does appear to be some room for optimism.

Goldman Sachs Raises Oil Demand Outlook

With demand concerns returning to the fore, Goldman Sachs’ decision to increase its global oil demand forecast came at a perfect time and may have mitigated some selling pressure.

Goldman Sachs analysts have raised their forecast for global oil demand, predicting an increase of 600,000 barrels per day this year and 400,000 barrels per day in 2026.

Despite this, the bank kept its oil price predictions unchanged at $60 per barrel for Brent crude and $56 per barrel for West Texas Intermediate (WTI) for 2025. Currently, Brent crude is trading above $65 per barrel, and WTI is over $62.

Goldman Sachs raised its oil demand forecast, citing optimism about a potential trade war resolution and a US-Iran nuclear deal.

However, the Investment Bank warned that if the tariff war continues and harms the global economy, Brent crude prices could fall to $40 per barrel by late 2026. This would also require OPEC+ to fully restore the supply cuts made in 2022, according to the analysts.

So a slight ray of hope where demand is concerned but the prices discussed in the Goldman note raises affordability concerns, particularly for US Oil producers. The $56 a barrel mark has been touted by some as a break-even point for US producers, with a drop below this price level likely to affect production and output. These are interesting times for oil markets, and there is a potentially bumpy ride ahead.

Technical Analysis - Brent Crude

From a technical standpoint. Brent crude posted a bullish inside bar close on Friday.

This is usually a hint at further upside, something which has materialized as the day progressed.

As things stand, the Oil price is approaching a resistance level at 66.42, with a break of the previous high potentially leading to a retest of resistance at 68.17.

The period-14 RSI on the daily timeframe has also crossed back above the 50 neutral level which signals a shift in momentum from bearish to bullish.

If, however, bears are to return and push prices lower, immediate support rests at 65.00 and 64.00 before the 62.81 handle comes into focus.

Brent Crude Oil Daily Chart, May 19, 2025

Source: TradingView

Client Sentiment Data - WTI Oil

Looking at OANDA client sentiment data, market participants are Net-Long on WTI, with 74% of traders holding long positions. I prefer to take a contrarian view toward crowd sentiment, and thus the fact that so many traders are long means WTI prices could decline further.

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