Brent crude oil traced out a near-term price top near $44.00 in June and July via the formation of a double top pattern. Since the recent weekly note, the technical landscape hasn’t changed.
Overnight commodities were mostly higher with Natural gas led the pack with a 5% rally and Brent up by 0.6%. There was no settlement Friday due to the U.S Independence Day holiday.
Saudi Arabia raises Oil pricing to Asia by a dollar a barrel from July, as OPEC+ further cut holds back. Traders are waiting for fresh clues before taking a new position. Buying dips favors the trend.
The EIA will release its Short-Term Energy outlook today. In its June outlook, the agency expects monthly Brent price will average $37/b during the 2H of 2020 and rise to an average of $48/b in 2021.
The June report highlighted that the forecast of rising crude oil prices reflects expected declines in global oil inventories during the second half of 2020 and through 2021. EIA expects high inventory levels, and spare crude oil production capacity will limit upward price pressures in the coming months. However, as inventories decline into 2021, those upward price pressures will increase.
Looking into technical, traders can keep an eye on $43.35-$44 levels on the higher side. As long as Brent trades below the given zone, the price may test a support at $41.30 and $39.70. Flipside, earlier support has changed to resistance. The Brent oil price needs to cross and close above $44.25 to print another high at $46.00 an $49.50.
Since 22 April low, the price rallied more than 170% buy still 33% down from this year’s opening levels. In the first half of 2020, OPEC+ production cuts made a significant contribution to push the oil price above $40 per barrel.
The near-term support finds at $39.70 below here focus on $37.00. A breakdown and close below $37 mean a distribution pattern starts the action that could lead to a decent pullback. Since April low, the price has been contained in the ascending channel. Whereas since mid-June, the price action breaks the channel lower end, suggesting the near-term price reversal. So, keep the focus on the current narrow range.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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