Oil prices met resistance at the level of $78–79 per barrel. Black gold ignores bullish growth drivers, which continue to enter the market. It seems that prices need a breather after rising 11% from their lows in mid-March.
Nevertheless, there is also some bad news for oil. As we stated in our forecasts before, the U.S. are eager to lower oil prices to fight inflation. Despite the world’s green agenda, the country provides vast new regions for oil and gas production.
The U.S. federal government offered a wide area of the central and western parts of the Gulf of Mexico for drilling projects, including deep-water regions. Around 30 million hectares, which is almost the same size as Italy, were auctioned.
The U.S. federal government calls this arrangement a 259 lease. The deal may provide output of more than 1 billion barrels of oil and 4.4 trillion cubic feet of gas in the following 50 years.
President of the Federal Reserve Bank of Minneapolis Neel Kashkari announced that it is yet unclear how the Silicon Valley Bank collapse will impact the economy. However, the Fed needs to focus on lowering inflation. Rates are forecast to reach 5.1% by the end of the year. In this case, another rate hike of 0.25 percentage point is to be expected.
Rising interest rates in the U.S. tend to strengthen the national currency and put pressure on commodity markets.
According to the technical analysis, the rise in oil has slowed around the 0.5 Fibonacci level from the whole fall wave. Now the testing of this level from below is continuing. On this background, the flat movement in oil was formed on the daily chart and prices are now closer to the upper boundary of the flat trend. There is a chance for opening short positions, expecting oil prices to decline.
The downside target will be the lows of the daily candles in recent trading days, which is equivalent to $77.3. Stop loss will be set at the renewal of local highs, meaning the break through the 0.5 Fibonacci level. It will be at $79.1.
Brent oil prices are likely to decline:
Take profit – 77.3
Stop-loss – 79.1
This content is for informational purposes only and is not intended to be investing advice.
