1. Tightening supply fundamentals and geopolitical tailwinds
Despite OPEC+ boosting output—including a planned 547,000 bpd increase in September and the phasing out of earlier voluntary cuts—oil prices have remained resilient around $66–$70 a barrel This tenacity is largely supported by robust refining margins and strong demand for diesel amid low global inventories—U.S. diesel stocks are running about 12% below their five‑year average, with European levels at their lowest since late 2023 Reuters. Additionally, simmering geopolitical risks, including U.S. sanctions on Russia and Iran or renewed Middle East tensions, add a premium to prices by tightening supply and fueling market uncertainty.
2. Demand and technical triggers pointing upward
OPEC has lifted its 2026 demand forecasts by 100,000 bpd, now projecting growth of 1.38 million bpd, while affirming strong demand for the rest of 2025. On the technical side, WTI crude currently sits above its 52-week moving average (~$66.05), with an upside target near $69.89 if buyers hold the trend. Moreover, there are signs of momentum building through key resistance levels—the $64–$64.40 zone—that, if breached, may spark further bullish momentum. Seasonal demand patterns (e.g., higher refining activity and travel-driven fuel consumption) typically lend additional support into early autumn.
3. USO positioning as a proxy for near-term crude gains
The United States Oil Fund (USO), designed to mirror short-to-medium term movements in WTI futures, stands to benefit directly from any uptick in oil prices. Several technical and sentiment-based factors reinforce this view: stock-investment models project a potential 13.8% gain over the next three months, with a likely price range of $83.55 to $101.11 if momentum returns. Yet, near-term resistance at roughly $76.10–$76.60 may need overcoming before meaningful appreciation; if broken, it could trigger a more sustained run . Given USO’s design emphasis on front-month futures and its alignment with crude price moves, it remains a compelling vehicle for investors looking to capitalize on near-term bullish oil dynamics.
In summary, a confluence of tight supply fundamentals, resilient refining margins, persistent geopolitical uncertainties, and technical signals breaking higher forms a strong bullish case for crude oil over the next few months. USO, as an ETF closely tracking those movements, is well-positioned to ride that wave—assuming it navigates key resistance levels and broader market sentiment remains constructive.
Dennis Leontyev
