Crude Oil ‘s Seasonal And Technical Outlook

Technical analysis suggests a bearish outlook for WTI crude oil, as recent rallies have consistently failed to overcome key resistance levels and hold above yearly pivots, with prices closing below critical support in April 2025. The Aspray Insight indicator confirms WTI's underperformance against the S&P 500, reflected in its 8.9% YTD decline in 2025 compared to the S&P's 7.9% gain. This confluence of negative technical signals, coupled with struggling energy ETFs, indicates that August could be a challenging month for oil prices and energy stocks, with a drop below July lows potentially confirming a new decline.

Analysis

A comprehensive technical review of West Texas Intermediate (WTI) crude oil futures indicates a decidedly bearish outlook. Recent price action has been characterized by failed rallies, notably the inability to sustain a move above the yearly pivot at $74.94, which keeps the annual trend negative. This follows a more significant technical breakdown in April 2025, when WTI closed below a key support line at $65.41. The commodity's weakness is further underscored by its significant underperformance relative to the broader market; the Aspray Insight indicator has been in a downtrend since late 2023, and so far in 2025, WTI has declined 8.9% year-to-date while the S&P 500 has gained 7.9%. This negative sentiment extends to the broader energy sector, with associated ETFs like the Energy Select (XLE) and SPDR S&P Oil & Gas Exploration (XOP) also exhibiting signs of failing rallies. The confluence of these factors suggests that August may present significant headwinds for oil prices, with a drop below the July lows serving as a potential confirmation for a new downtrend.

Key Decisions for Investors

• Given the repeated failure of WTI to overcome key technical resistance and the prevailing negative trend signals, investors should consider maintaining bearish positions or exercising extreme caution on long exposure to crude oil.
• The concurrent weakness in major energy ETFs, including XLE and XOP, suggests broad-based sector pressure, making it prudent to review and potentially reduce exposure to oil and gas exploration and production equities.
• A drop below the July lows for either WTI, XLE, or XOP should be monitored closely as a critical confirmation signal that could trigger a new leg down in energy prices and related stocks.
• The stark underperformance of WTI relative to the S&P 500 supports relative value trades that favor long positions in the broader market over exposure to the energy sector.