Oil prices may renew their local highs again

17 April 2023 179
Oil prices may renew their local highs again

There was a rise in volatility of the oil market at the end of last week. Brent crude oil quotes were declining to the level of 85.5, but the bears were not ready for more, and by the end of trading the drawdown was bought back. The bulls' activity could lead to another hike in prices to their local maximums of the last week near the level of $87.5 per barrel.

 

On Friday, oil market participants expected a new monthly report by the International Energy Agency (IEA). Forecasts on the market situation have not changed significantly, even despite the new OPEC+ production cuts. Expectations for growth in global demand for oil remained unchanged, at the level of about 2 million barrels per day.

 

The IEA concedes that recent OPEC+ actions could make supply shortages worse in the second half of 2023 and boost oil prices, although industrial activity in major Western economies is slowing. Considering both of these factors, the oil market will be more or less balanced. The IEA report is reasonably positive for oil prices, although the key conclusions basically coincide with the U.S. Energy Information Administration and OPEC estimates published a little earlier.

 

The trading process in the oil market will greatly depend on the statistics of the Chinese economy, which will be published on Tuesday early morning. GDP and industrial production data for the first quarter of this year will be under the close attention of analysts, since the demand for oil mainly depends on the pace of economic growth in China. If the actual numbers are better than forecast, it will be positive for commodity prices.

 

The range of 85.5-86 should be used to open long positions. The return to the level of 87.5 is the current growth target for Brent oil quotes. The scenario of an uptrend remains relevant as long as prices stay above the 84 level.

 

 

The following trading strategy option can be suggested:

 

Buy Brent oil in the 85.5-86 range. Take profit – 87.5. Stop loss – 84.

 

Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.

This content is for informational purposes only and is not intended to be investing advice.

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