Brent crude oil quotes dropped below $74 per barrel yesterday, in line with the latest forecast. However, in the second half of the day, buyers became more active, almost completely leveling the Friday's drawdown. On the daily chart of Brent oil, the price is testing the downtrend line, continuing from the April highs. The current news background might support the bulls and help the prices go up to 76.5 and 77.5.
Yesterday the oil market was under the influence of verbal interventions by the U.S. Department of Energy officials again. Jennifer Granholm, head of the department, announced the purchase of 3 million barrels of oil to begin restocking the strategic reserve (SPR). Offers from suppliers will be considered until May 31, and there are no guarantees of real oil purchases for SPR now. But at least the psychological pressure on the "bears" has already been made, and now it will be much harder for them to return prices to their recent lows.
Statistics on the productivity of Chinese refineries may also play in favor of the oil price growth. April refinery output was 14.87 million barrels per day, just slightly below March's historic high of 14.9 million barrels. Refinery productivity rose by nearly 19% compared to April of the last year, even despite the pause in operations at some facilities due to maintenance.
Another factor in favor of oil price growth is the disruption of oil production in Canada due to forest fires. At the end of the last week, cooler weather and rains slightly eased the tension, but now the heat is back and oil producers have to stop production again.
After breaking the downtrend, first of all, the Brent oil quotes will move towards the growth targets at the levels of 76.5 and 77.5. To take the initiative the bears would need to bring the price below 74, but due to the changed news background such a scenario was put on the sidelines.
The following trading strategy option can be suggested:
Buy Brent oil in the range of 75-75.5. Take profit 1 – 76.5. Take profit 2 – 77.5. Stop loss – 74.
This content is for informational purposes only and is not intended to be investing advice.
