Brent crude pulls back and gives up its previous gains

Brent crude tried to pick up its upward momentum again this week, but the rally didn't last long. Buyers are now facing several key headwinds, with a medium-term downtrend still in place, the 50-day moving average capping rallies, and a solid wall of resistance at $65–$66. As a result, markets are witnessing a pullback that has already wiped out nearly half of October's gains. At this point, the most likely path seems to be a return to the $61 level and autumn lows.

On the technical side, the daily Stochastic Indicator has already flashed a sell signal, and the RSI has stalled near its midline. Staying short looks like the play for now, provided quotes remain below the key $65–$66 zone. That area has flipped its role—it was a support on the way down, and it's currently acting as a firm ceiling. Bulls will have a hard time breaking through it, especially given the fundamental picture and seasonal trends working against them.

Fundamentally, the initial jolt from the new US sanctions against Russian oil giants, such as Rosneft and Lukoil, has almost worn off. The jump investors saw back on October 22 and 23 didn't have legs, largely because no serious supply disruptions were anticipated. On top of that, winter typically brings a seasonal dip in fuel consumption, which pretty much takes a potential stockpile lack off the table.

OPEC+ appears to have factored this seasonality into their quotas by choosing to hold off on their planned production hikes from January through March. However, even with that pause, traders are still staring down a serious supply surplus. Saudi Arabia, not willing to lose its customers, has already slashed its official selling price to Asia by over a dollar per barrel. But that might just be a band-aid. According to HSBC's estimates, the OPEC+ move will only trim the expected oil glut from 3 million to 2.7 million barrels per day—which is still a massive oversupply.

The following trading plan may be taken into account:

Sell Brent crude in the $63–$64 range. Take profit: $61. Stop loss: $65.5.