Oil prices are making an attempt to rise after Saudi and Russian representatives confirmed expectations of high oil demand for this year. Markets are also assessing the consequences of the banking crisis, as well as methods of solving related problems by providing extra liquidity.
According to the International Energy Agency (IEA), the second half of this year is to face a supply shortage in the oil market. At the same time, global demand for fossil fuels is expected to grow significantly due to the high pace the Chinese economy is recovering.
The IEA confirms a future increase in demand. However, it is expected to rise only in the second half of the year, so this is a medium-term driver for oil growth. For now, this factor has a minimal impact on prices. Against the backdrop of oil prices decline, it would be reasonable to expect actions from OPEC, but the alliance has limited itself to verbal statements about future demand growth.
If the U.S. started to replenish its strategic reserves, this could act as yet another driver for oil's growth. Last year, Biden announced that the U.S. would start the replenishment as soon as the price of oil reaches $70 a barrel. Now, WTI oil is trading around $67, and there have been no announcements yet. This is rather understandable, as the U.S. is struggling with inflation while also trying to keep its economy afloat. That's why low oil prices are currently extremely beneficial for the country. This fact may be holding back the bullish enthusiasm on the market.
As for the technical analysis, oil is forming an uptrend from its lows on the 1-hour timeframe. Two bullish engulfings have already appeared at the lower limit of the trend, which foreshadows further growth of oil. However, the prices remain at the upper limit now, and the candlesticks indicate weak demand at this point. The RSI on the 1-hour timeframe is approaching the overbought zone. From this point, there is an opportunity to go short within the trend.
The lower limit near the level of $73.4 will be the downside target. A stop-loss could be placed when the growth of oil accelerates and the price breaks through the resistance at the level of $77.0.
A decline in Brent oil prices:
Take profit – 73,4
Stop-loss – 77,0