Volatility in the oil market has sharply increased after the problems in the U.S. banking sector appeared. This very weekend, the Fed announced its support measures for the banks, which will receive additional liquidity to solve their problems. Against this background, the chances of the Fed softening its monetary policy at the next meeting have risen considerably. The markets responded positively to this news, with the oil market rising as well.
However, inflation is still there. Just on Tuesday, there will be a release of new data on the US consumer price index, which might cool down the bulls' enthusiasm on the market. This might happen in case the inflation is again worse than expected.
This year's oil demand forecasts are starting to be revised for the worse again.
According to a new short term energy outlook released by the U.S. Energy Information Administration (EIA), oil price expectations for 2023 have been lowered. The changes affected the prices of both Brent and WTI crude oil.
The EIA now expects the Brent price to be about $82.95 per barrel and the WTI at about $77.10 per barrel this year. Fitch Solutions has also lowered its forecast for the Brent oil price for the current year. Now, the company sees Brent oil averaging $90 per barrel in 2023. At the same time, the latest Bloomberg Consensus and a recent Standard Chartered report don’t suggest such a decline to take place.
As shown by the technical analysis, there was a false breakdown of the pennant in the oil price chart on Friday, and this time it was near the lower limit. We have been monitoring the unfolding of this figure for several weeks now. The pennant has actually converged at one point, so now the oil price needs to determine the further medium-term direction of movement. The upper limit of the pattern is now being tested.
Let's assume going down below the pennant again to the local lows of last Friday. Let's assume going down below the pennant again to the local lows of last Friday. Such a case is possible if market expectations for new incentives cool down. The target of decrease will be the level of $81.00. Stop-loss may be placed at a solid breakout above the figure and renewal of local highs of the recent days. This is the level of $84.35.
A decline in the Brent crude oil price:
Take profit - 81.00
Stop-loss - 84.35
This content is for informational purposes only and is not intended to be investing advice.