Brent oil prices closed another trading session with positive results. Yesterday the prices rose above $78 for the first time since May 2 and targeted to hit the round level of $80 per barrel soon. Given the news background of the last few days, as well as the favorable technical picture on the chart, the 80 level might be tested in the near term.
Market participants continue to assess the comments of Saudi Arabia's Energy Minister about big risks for holders of short positions on oil contracts. According to Reuters, over the past 4 weeks the amount of hedge funds’ short positions increased more than twice from 79 to 184 million barrels. A more bearish positioning of oil market participants was only in late March before the OPEC+ unexpected decision to additionally cut production.
Since the data on major investors' positions in the oil market comes with a week’s delay, it might be suggested that in recent days the situation has somewhat changed in favor of bulls. However, given the fact that oil prices still have not won back even half of the fall recorded in the market in late April and early May, the outlook for even more massive closure of short positions should give buyers additional confidence.
The Energy Information Administration data on the U.S. oil inventories also became a reason for a more positive market outlook in the near term. Over the past week, inventories decreased by 12.5 million barrels at once, with 1.6 million barrels of oil withdrawn from the Strategic Reserve, the general decline was the largest since November.
From a technical point of view, the rise in oil prices is supported by the uptrend line from the local low of May 4. In turn, the RSI indicator shows that the increase is still being far from the overbought zone. Thus, testing the range of 79.5–80 at the end of this week and at the start of the next one is highly likely.
The following trading strategy may be offered:
Buy Brent oil in the range of 77.5-78. Take profit 1 – 79.5. Take profit 2 – 80. Stop loss – 76.5.
This content is for informational purposes only and is not intended to be investing advice.