Oil is trading in the narrow range of $84–86. Investors are assessing the implications of OPEC+ output cuts and the probability of recession which caused the cut by the global organization.
According to the Labor Department, nonfarm payrolls rose by 236,000 in March. The data were nearly the same as predicted and well below the previous figures. The labor market is strong but shows some signs of fading momentum. A gradual weakening of the labor market is still to be expected.
A weak labor market could support commodity prices as the Fed will have one more reason for softening the monetary policy. The next important event will be the U.S. inflation data release on Wednesday. A reduction of inflation is likely to lead to a loosening in the central bank's monetary policy.
Drilling activity in the U.S. continues to fall. All forecasts imply that it will be difficult for the States to maintain production growth at a high level in the future. Upstream investment plunges due to rising inflation, higher taxes and the green agenda.
As stated by Baker Hughes, the total number of active rigs in the U.S. fell by 4 units last week and reached 751. It was 62 rigs less than the 2022 figure. However, U.S. oil production remained unchanged at 12.2 million bpd for the week ended March 31. This was reported by the Energy Information Administration (EIA).
On technical analysis, oil price is moving sideways. The bullish fundamentals continue to push oil prices up. Recession risks are not dominant right now, so bears remain suppressed.
Attempts of breaking through the upper limit of the flat trend could be expected. The growth target will be a local high at the level of $85.8. Stop-loss is placed below the bottom limit near the level of $83.8.
Brent oil is likely to rise:
Take profit – 85.8
Stop-loss – 83.8