In my April 15 Barchart quarterly report on the energy sector, I highlighted my bearish view of crude oil prices, concluding:

Bullish and bearish factors have tilted toward the bears in early Q2. Hostilities with Iran could cause sudden upside spikes in oil prices now that the price has dropped below $60 per barrel. However, if the current trend continues, my target for crude oil is $50 per barrel, with the potential for even lower prices. 

I believe crude oil futures will reach the $50 downside target and could move even lower before finding a bottom. 

The bearish trend remains intact

After nearby NYMEX crude oil futures peaked above $130 per barrel in March 2022, the energy commodity has made lower highs and lower lows. 

The monthly chart highlights that WTI crude oil futures made lower highs and lower lows until reaching $63.57 in May 2023, which held until April 2025 when crude oil reached a lower $55.12 per barrel low. The price was trading back near the $63.50 level on May 14, 2025, but the bearish trend remains intact. 

OPEC+ increases output

OPEC, the international oil cartel, cooperates with Russia, another leading oil-producing country, on production policy. After years of output cuts, OPEC+ increased its members’ output quotas in April 2025. In early May, the cartel told markets it would accelerate oil output hikes that could bring as much as 2.2 million barrels per day more by November. 

Increasing output from the cartel’s membership and the potential for more U.S. production under the Trump administration put pressure on crude oil prices, leading to the most recent decline below $60 per barrel but the price recovered from the low. 

Recessionary fears over tariffs- China’s economy will suffer from the U.S. tariffs

U. S. President Donald Trump declared April 2, 2025, “Liberation Day” as he rolled out unprecedented tariffs on U.S. trading partners to level the playing field. While negotiations for new trading protocols continue, the tariffs have ignited recessionary fears, weighing on U.S. and global economic growth, increasing inflationary concerns.

The U.S. is the world’s leading consumer market, with China relying on exports to the U.S. While the odds favor a trade deal between Beijing and Washington, President Xi and President Trump have egos that will make negotiations challenging. Henry Clay, a U.S. Senator in the 1800s, said that a great compromise can only occur if both sides walk away from the negotiating table unhappy. However, in the case of U.S.-Chinese negotiations, a great trade compromise may only happen if both leaders can claim victory. Therefore, the talks could take time, impacting China’s economy over the coming months. If China’s economic landscape remains weak, with slowing growth, demand for crude oil could suffer as OPEC+ increases output and U.S. energy policy supports higher production. Moreover, President Trump’s agenda to combat inflation includes initiatives to reduce crude oil prices, a critical cost of goods sold component of most goods and services.   

Rallies have run out of steam, but geopolitical concerns could ignite a spike

All attempts at rallies in the NYMEX crude oil futures market have run out of upside steam in 2025. 

The daily chart of NYMEX crude oil futures for June 2025 delivery shows that rallies to $75.51 on January 15, $72.56 on February 20, $71.76 on April 2, and $64.87 on April 23 have led to lower lows. The current technical support is at the April 9 $54.67 low. While the energy commodity made a low of $55.30 per barrel on May 5, but while the price trend remains bearish, the June futures were closing in on a challenge of the April 2 $64.87 high and first resistance level on May 14. 

The geopolitical landscape remains highly tense, with potential hostilities in the Middle East and other regions. Any geopolitical surprises could ignite a recovery rally in crude oil futures, but so far in 2025, the price has been falling in a very volatile world. 

SCO is the leveraged bearish NYMEX crude oil ETF product

The most direct routes for a risk position in the crude oil market are the futures and futures options trading on the CME’s NYMEX division. The Bloomberg Ultra Short Crude Oil -2X ETF product (SCO) seeks to provide twice the inverse daily performance of the Bloomberg WTI Crude Oil Subindex. At $19.06 per share, SCO is a leveraged and liquid product with over $98.7 million in assets under management. SCO trades an average of over 1.29 million shares daily and charges a 0.95% management fee. 

The most recent decline in June NYMEX crude oil futures took the price 14.75% lower from $64.87 on April 23, 2025, to $55.30 per barrel on May 5, 2025.

Over the same period, SCO rallied 19.27% from $19.56 to $23.33 per share. One of SCO’s drawbacks is that the ETF is only available during U.S. stock market hours, while crude oil futures trade around the clock. SCO can miss highs or lows occurring during off-hours in the stock market. SCO declined to the $19 per share level on May 14 as crude oil rallied and was threatening to challenge the most recent high and short-term technical resistance level. 

Crude oil’s trend remains lower in May 2025, with the potential for a $50 per barrel level challenge. SCO can be a valuable trading tool, but its leverage, which causes time decay, requires time and price stops for risk positions. On the downside, SCO will outperform crude oil’s short-term price action, but the ETF will lose value if crude oil rallies or the price remains stable. The cost of magnifying the downside is more substantial losses on the upside and decay if oil prices stay in a tight range.