Oil pulls back as markets look to the next catalyst. Here’s what to watch

Oil prices are back under pressure after a sharp pullback from recent highs, putting the commodity firmly back in focus for investors.

After rallying strongly through late January, crude oil has slipped around 5%, with West Texas Intermediate (WTI) now trading near US$61.90 per barrel. Brent crude has also moved lower, sitting around US$65.95 per barrel.

The move marks a shift in momentum after oil briefly pushed toward multi-month highs. It has also reopened debate over whether prices are entering a new phase or just consolidating after a volatile start to the year.

Oil gives back recent gains

Oil began the year with firmer momentum as geopolitical tensions increased, and traders focused on potential supply risks.

Those conditions helped push prices higher through January. However, the recent drop has erased much of that short-term rally, bringing oil back toward levels seen earlier in the year.

At current prices, WTI remains well above its 2025 lows, but still comfortably below levels that would suggest a sustained breakout. That leaves oil trading in a range-bound pattern, with sentiment shifting quickly based on news headlines and macro signals.

Markets turn their attention to what comes next

With oil back near US$62 per barrel, the market’s focus has shifted away from short-term price moves and toward what could drive the next sustained trend.

Traders are watching geopolitical developments closely, particularly in the Middle East, where any change in tone can quickly affect oil pricing. At the same time, broader financial markets are playing a growing role, with currency movements and global risk sentiment influencing commodity prices.

Supply conditions also remain important. Major producers continue to keep output steady, and global inventories remain relatively comfortable. Without a clear supply shock, oil prices have struggled to push meaningfully higher for long.

What this means for ASX energy stocks

Attention is increasingly turning away from oil price moves and toward underlying company fundamentals.

With crude prices pulling back, attention is likely to shift toward cost control, cash flow, and balance sheet strength. Woodside Energy Group Ltd (ASX: WDS) may benefit from its diversified oil and LNG mix, while Santos Ltd (ASX: STO) could face closer scrutiny due to its upstream exposure.

At current oil levels, neither company is under significant pressure, but sustained weakness would likely weigh on earnings forecasts.

Foolish Takeaway

Oil’s move back towards US$62 highlights just how quickly momentum can change in commodity markets. With prices sitting in the middle of a broad trading range, the next move will likely depend on confidence, geopolitics, and shifts in global markets rather than supply alone.

For those following Woodside and Santos, oil prices remain an important factor to watch as the year progresses.

The post Oil pulls back as markets look to the next catalyst. Here’s what to watch appeared first on The Motley Fool Australia.

More reading

• Buying ASX energy shares? Here’s how Santos and Woodside shares stacked up in January
• 5 things to watch on the ASX 200 on Tuesday
• Here’s the earnings forecast out to 2028 for Woodside shares
• 5 things to watch on the ASX 200 on Monday
• 3 ASX 200 shares I would buy in February

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.