Buying Brent crude on fading risk of global deficit

Brent prices have plummeted over the past week and are now trading near $75 per barrel.

The key headwind is a tedious waiting for global supply to rise. Following the reopening of the Strait of Hormuz, some oil—previously seized in the region—started to flow back to the market, raising the risk of a short-term surplus. This is compounded by sluggish demand from Europe and Asia, which have already secured fuel deliveries for the summer. OPEC policy is another pressure factor. There is a likelihood of further production quota increases, which would cap any potential recovery in prices.

The demand picture does not look pretty as well. On the one hand, a peak summer season and a decline in US commercial crude inventories could underpin quotes. On the flip side, weak oil imports to China and Europe, combined with growing concerns about future oversupply, reduce buying interest.

In general, the fundamental picture looks quite pessimistic. Lower geopolitical premiums, restored supplies, and risks of increased production outweigh the support provided by temporarily reduced inventories. In addition, the technical setup suggests the next downside target at $70 per barrel.

The ultimate recommendation is to sell Brent crude at the current price, aiming for $70 per barrel within a week. To mitigate the risk of adverse market movements, place a Stop Loss order slightly above resistance, at $75.