Brent crude oil prices broke a three-day rally yesterday, falling by 0.87%. In order to get above the level of 77, there is not enough buying activity yet. At the same time, the main achievements of the beginning of the week were preserved, and while the quotes are still above the level of 74.5, it looks more likely that oil prices will continue to rise soon.
Еhe U.S. Secretary of Energy Jennifer Granholm comments on the situation with the Strategic Petroleum Reserve (SPR) caused yesterday's drop in oil prices. Previously, Granholm announced the renewal of oil purchases for SPR when the price of American crude oil WTI fell below $72 per barrel. In recent days, this condition began to be complied with - the WTI quotes fell even below the level of 70 for the first time since December 2021.
Yesterday, the minister announced that 2 major storage facilities that previously held SPR oil will be subjected to technical maintenance this year, which will prevent them from being used. Accordingly, the replenishment of the SPR is again postponed indefinitely. Moreover, between April 1 and June 20, another 26 million barrels of oil will be sold from the strategic reserve to compensate for part of the U.S. federal budget deficit.
However, it should not be forgotten that the SPR is only a tool for short-term balancing of the oil market, it has almost no effect on the long-term prospects of supply and demand. There is not much optimism on the supply side: Quantum Energy predicts that if current prices remain unchanged, U.S. oil producers may reduce well drilling by 20%. To maintain drilling at least at current levels, oil prices should steadily stay close to $80 per barrel.
The next upside target for Brent is the level of 77, which has already been tested several times in recent days, but it has not yet managed to consolidate above it. As long as the quotes do not fall below 74.5, the bulls will keep the short-term initiative in their hands.
The following trading strategy option can be suggested:
Buy Brent oil in the range of 75-75.5. Take profit – 77. Stop loss – 74.5.