Brent crude oil price remains under pressure as it faces a double whammy of weak demand and high supplies in the coming months. It trades at $64.65, a few points above this month’s low of $58.46. This article explains the three top reasons why it may continue crashing to $45 in the coming months.
Brent crude oil price formed a descending triangle
The first main reason why the crude oil price is heading south is its technicals. It has moved below the 50-week moving average, a sign that bears remains in control for now.
Most importantly, it has formed a descending triangle pattern, comprising of a horizontal line at $70 and a descending diagonal line that connects the highest swings since August 2022.
A descending triangle is one of the most bearish chart patterns in the financial market. This is notable since it has already moved below the lower side of the triangle, confirming its validity.
Crude oil price has slumped to the 61.8% Fibonacci Retracement level and the Ichimoku kinko hyo indicator.
Therefore, the path of the least resistance is lower, with the next key target to watch being at $45. This target is derived by first measuring the widest level of the triangle, and then the same distance from the lower side of this triangle.
Brent crude oil chart by TradingView
Looming oil supply jump
The next key catalyst for the crude oil price crash is the looming supply surge. First, Donald Trump has been talking about negotiations with Iran as part of his goal to end its nuclear project.
While Iran was hesitant at first, officials have agreed to a meeting. If this deal goes on, Iran will surely demand the end of sanctions, a move that will lead to over 1 milion barrels coming online in the coming months.
At the same time, the US is having negotiations with Russia about how to end the war in Ukraine. Trump’s top advisor even met with Vladimir Putin on Friday, and a meeting between the two presidents is set to happen.
Again, any deal with Russia will have a clause on ending the sanctions against the country, which will lead to more oil supply.
The other key supply aspect is in the United States, where Trump has focused on easing regulations as part of his “drill, baby, drill” policy. Analysts now believe that US will increase its production from the current 13.5 million barrels a day to over 15 million in the next few years. OPEC+ members also voted to increase their oil production in their last meeting.
Demand is a big issue
The rising oil supply will happen at a time when there are concerns about oil demand ahead of a potential recession. Analysts believe that the US and other countries could move into a substantial slowdown or a recession this year.
Trump has implemented large tariffs that will ultimately have a negative impact on the economy. Tariffs on China now stands at 145%, a ridiculously high figure. As a result, economists from companies like Blackrock, JPMorgan, and Moody’s have also warned of a recession.
Historically, crude oil demand often falls during a recession. Indeed, the Energy Information Administration (EIA) has warned of a major demand shock in the coming months. It downgraded its demand estimates for 2025 and 2026.
Similarly, the International Energy Agency (IEA) has also warned that these tariffs will hurt oil demand by about 600k barrels a day this year. It expects that the demand will be about 103.9 million barrels a day this year.
Therefore, a combination of weak technicals, high oil supplies, and low demand will propel Brent crude oil price lower.
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