Brent crude holds gains as sentiment rebounded, gained more than 17% to 58.95$ a barrel.

Brent oil price halted their Southward journey after dropping more than 40.0% in just thirteen-weeks. Technically, highly overbought and a series of negative divergence conditions pressed the oil price to the lowest level since August 2017. Besides, supply concerns and concerns about economic growth are the fundamental factors dampen the bullish sentiment and propel the volatility.

The supply and easing global growth are continuing to raise the volatility over the near and medium term.

As we noted earlier the Brent crude oil resumed the rally from the lower end of the forecasted range 56.00-50.00$ and settled above 200MA (Weekly). Overnight the price failed against the 23.6 fib reaction seems at 59.00$.

Supports located at 56.60, 55.50 and 54.00$. The flip side, resistance stand at 59.00$, 61.20$ and 64.00. A successful foot above 63.75/64.00$ could trigger a sharp near-term rally 68.50/70.00$.

We still forecast a limited “downward approach.”  Brent oil might have put in a meaningful bottom between 56.00$-50.00$ and could consolidate sideways for few days.  So far, the first part done, consolidation looms.

Key resistance levels to watch:

  • Near-term: 61-61.20$
  • Medium term: 64.00$ its 38.2 fib reaction

Despite the recent sharp, significant rally, Goldman slashed Brent oil forecast. “Our 3 and 6-mo Brent price forecasts are now $62.5/bbl and $67.5/bbl, down n from $70.0/bbl previously but still above market forwards. Our 2019 average forecasts are $62.5/bbl for Brent and $55.5/bbl for WTI with our 2020 respective forecasts unchanged at $60.0/bbl and $54.5/bbl.”

The authors (Damien Courvalin, Jeffrey Currie, Huan Wei, and Amber Cai ) also noted “we expect that the oil market will balance at a lower marginal cost in 2019 given: (1) higher inventory levels to start the year, (2) the persistent beat in 2018 shale production growth amidst little observed cost inflation, (3) weaker than previously expected demand growth expectations (even at our above consensus forecasts) and (4) increased low-cost production capacity.”.

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