On Friday (February 21) during the European trading session, WTI crude oil futures fell slightly, falling below the key 50% retracement level of $72.08 and below the 50 day moving average of $71.93. If oil prices continue to fall below this moving average, it may test $70.65, causing crude oil to fluctuate within the potential range between these technical indicators. The market is currently within the retracement zone, with 50% of levels above $72.08 and 61.8% below $70.35.

The short-term range of $73.65-70.12 reflects a neutral sentiment, as prices fluctuate between the swing top, bottom, moving average, and retracement levels. This technical setup suggests that traders may be on the sidelines, waiting for a clear market catalyst to break the current impasse.

Supply interruption supports crude oil prices

Oil prices fell on Friday, but are still expected to rise this week, driven by concerns about supply disruptions from Russia and optimistic demand prospects from the United States and China. Despite both Brent crude oil futures and US West Texas Intermediate (WTI) prices falling, they still rose by about 2% this week, marking the largest weekly increase since early January.

The interruption of oil supply has always been a focus of people's attention. Russia reported that after Ukrainian drones attacked a pump station, the flow of oil through the Caspian Pipeline Union (the key route for Kazakhstan's crude oil export) decreased by 30% -40%. Despite suffering losses, Kazakhstan has managed to push its oil production to record highs, although it is currently unclear how this was achieved.

US inventory data shows mixed supply

The latest data from the US Energy Information Administration (EIA) shows that crude oil inventories increased last week, while gasoline and distillate inventories decreased. The seasonal maintenance of the refinery has led to a decrease in processing efficiency. The decline in US gasoline and distillate inventories, coupled with concerns about Russian supply, provides potential support for oil prices.

Fujitomi Securities analyst Toshitaka Tazawa pointed out that expectations for a peace agreement between Russia and Ukraine have weakened, which has reignited buying interest in the oil market. Although hopes of easing sanctions on Moscow earlier have weakened, Ukraine's tough stance indicates that geopolitical risks remain a market factor.

The demand outlook for the United States and China remains strong

According to analysts at JPMorgan, as of February 19th, global oil consumption averaged 103.4 million barrels per day, an increase of 1.4 million barrels per day in demand. They expect that the cooling weather in the United States and the increased industrial activity in China after the holiday may further boost demand in the coming weeks.

The interaction between strong demand signals and supply uncertainty continues to affect market sentiment, with prices still receiving support despite a pullback last Friday.

Market forecast: neutral to optimistic

Given the neutral technical indicators and the market waiting for a decisive catalyst, crude oil prices may continue to fluctuate within a narrow range in the short term.

However, due to supply risks in Russia and potential demand growth in major economies, market sentiment is slightly optimistic. If the price breaks through the 50 day moving average of $71.93, it may trigger more buying interest, while if it falls to $70.65, it may attract new support, thus maintaining a balanced but cautiously optimistic market outlook.