Crude Oil Erases War Gains, Tests $68 Support Zone

Crude oil closed near $68 a barrel Friday, wiping out every gain added during the war premium. The settlement at $68.03 handed back all of the $7 rally that followed the initial conflict headlines in April. Prices now sit at the lower end of a range that has contained the market since the start of the year.

The 67-68 zone has served as a technical floor since early 2024. It marks the level where buyers stepped in after a selloff last June and again during a false breakout in October. Traders watching the charts say a break below $67 would open the door to $64, the next major support from the 2023 lows. A hold above $68, however, sets up a potential run back to the top of the range near $79.20.

The move lower came as supply fears faded. Diplomatic efforts eased the risk of a wider disruption, and OPEC members signaled no output cuts despite the price slide. The absence of a fresh catalyst left crude to grind lower, eroding the war premium day by day. The Oil Below $70 Resets Rate Path Debate, Julius Baer Says article captured the same dynamic: lower oil changes the inflation outlook, which feeds rate expectations and the dollar. A weaker dollar would support dollar-denominated commodities, including crude.

The 67-68 support is not just a round number. It coincides with the 200-day moving average, a level that has produced bounces in the past. Traders are watching whether the close on Monday confirms Friday's test. A close above $68.50 would signal the first higher low after three weeks of declines. A close below $67.50 would suggest the zone is cracking and that the next leg down is underway.

Volume data from Friday showed an increase in open interest near the open, then a drop-off as prices stabilized. Traders said that pattern suggests short-term speculators covered positions into the close rather than adding new shorts. If that interpretation holds, the market may not have the conviction to push through support on the first attempt. Long liquidation has dominated the past two weeks, and positioning data from the CFTC shows managed money trimmed long exposure by 12% in the week ending Tuesday. The weekly COT data will show whether that trend continued.

For a trader looking at this setup, the simple read is that crude is oversold and sitting on a historical support level. The better read is that the war premium is gone and no new bid has appeared. The confirmation that the support holds would be a reaction that pushes prices to $70.50 in the next two sessions, a level that would reverse the lower highs. The invalidation would be a close below $67.00, which would target the 2024 lows near $64.

Traders expect a sustained bounce to face headwinds at $72.50, where the 50-day moving average sits. Beyond that, $75 and then $79.20 come into play. The $79.20 level is the August high and the upper end of the range that has held for twelve months. A break above that would require a new catalyst – a supply disruption or a significant shift in demand expectations. Absent that, the range trade is the baseline.

The dollar's recent strength has added pressure. A rising dollar makes crude more expensive for buyers using other currencies. The Dollar Rally Faces Pullback Risk, Credit Agricole Warns article notes that the greenback's run may be extended, which, if reversed, would remove one headwind. The correlation between the dollar and oil has weakened over the past month; the two assets now move with less than 0.3 correlation on daily returns, meaning oil's slide has its own drivers.

The next concrete date is the weekly API inventory report on Tuesday night, followed by the EIA report Wednesday morning. A drawdown in crude stocks of more than 2 million barrels would provide the first sign that demand is absorbing the supply overhang. A build would reinforce the narrative of a loosening market and increase the odds of a break below $67.