Brent prices have recently plunged from $120 to $100 per barrel. The reason is straightforward: a mix of the US President’s big talk and sensational headlines. But let’s not forget that the real fundamental picture isn’t that promising, as the global crude deficit issue has yet to be resolved.
The Organization of the Petroleum Exporting Countries (OPEC) continues to ease its voluntary production cuts. In May, the group raised quotas by 206,000 barrels per day (bpd), taking into account the UAE's share prior to its departure from the agreement on May 1. Earlier this month, the alliance approved a third consecutive monthly increase in quotas—this time by 188,000 bpd, distributed among seven key OPEC members. The next meetings are likely to bring new hikes.
Of course, the group’s recent attempts to boost production look more symbolic than effective. They have yet to influence crude prices in any meaningful way. This could change, however, if the Strait of Hormuz blockade is lifted. Then, bearish sentiment could spread among traders. With this in mind, investors should pay close attention not only to OPEC's quotas but also to actual output and export figures.
From a technical standpoint, oil prices successfully tested the $100 support level before rebounding. Thus, the corrective downward move is likely over, and another rally is on the way, with resistance at $115 per barrel as the nearest upside target.
The final recommendation:
— Buy Brent crude at the current price, aiming for $115 per barrel within the next couple of weeks.
— Place a Stop Loss order at around $110, just below support, to manage risks if the market plays against us.
This content is for informational purposes only and is not intended to be investing advice.
