The struggle for the initiative in the oil market is becoming more and more sharp

08 June 2023 206
The struggle for the initiative in the oil market is becoming more and more sharp

Brent crude oil quotes did not start their downward movement further than the level of 76 for the second day in a row. The initiative shifts very quickly from sellers to buyers and back, still it is not possible to form the stable trend. But since yesterday the controversial news background did not become a barrier for the drawdown buyback, by the end of the working week the "bulls" may target the 78 level again.


Strongly weakened data on China's trade balance created a negative. It was significantly compensated in the oil market. In a detailed review of trade statistics, it is clear that the demand for oil in the Celestial Empire is still high. Oil imports rose to 51.44 million tons in May. This corresponds to an increase by 17% month-on-month and 12% year-on-year.


The positive dynamics in China's consumption of raw materials can help to improve sentiment in energy markets. Recently, investors were strongly concerned about the country's weak economic recovery. A lot of companies were restocking on energy reserves before the summer peak in demand. It is important for the seasonal increase in consumption to meet expectations, otherwise imported oil will accumulate in reserves, and purchases may fall in the following months.


The official statistics on U.S. oil reserves by the Energy Information Administration contributed to the uncertainty among market participants. Crude reserves fell, but fuel inventories rose more than expected, and oil production in the U.S. reached the highest level since the end of 2019. It is quite possible that the forecasts for the balance in the U.S. market of petroleum products will change soon to a certain surplus. At this point, the July production cut by Saudi Arabia may support prices.


The technical picture on the Brent oil chart, as well as the fundamental background, is not clear. Maintaining the support at 76 supposes one more attempt to rise to 78, but the Stochastic indicator gives a sell signal. The most probable scenario is when the price reaches the level of 78 and the subsequent correction.



The following trading strategy option can be suggested:


Buy Brent oil around the 77 level. Take profit – 78. Stop loss – 76.

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

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