In the near term, the Brent oil seems to have a real reason to retrace further. Fundamental reasons are growing concerns over US output and tight OPEC supply. Technical reasons are posted a bearish H&S pattern and underlying indicators are remains bearish.
Positioning: The hedge funds and money managers cut their bullish exposure for the first time in three weeks.
Reuters reported Energy services firm Baker Hughes said on Friday that energy companies last week cut oil rigs for the first time in almost two months.
From a technical trading perspective, the price action has closed below the 20MA, however, has not broken the ascending trendline (below chart).
The daily underlying indicators suggest that rally to resistance at 65.70-66.00 should attract selling interest, with support at 63.00/63.30$ and 61.60/61.00$. Below the neckline (below chart) the focus will move down to 200MA at 58.30 and 250MA 57.00$.
In the very near-term if the price tested below the 63.00$ March 01 low, we forecast further retracement to support zone finds between 61.60$-61.00$.
Market traders are looking for OPEC and IEA reports will be released on Wednesday and Thursday respectively.
View: Over the coming days, we would suggest any rally to the January high or beyond unable to sustain.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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