Brent oil is looking for support at 72 again

13 June 2023 233
Brent oil is looking for support at 72 again

Brent oil prices started the new week with a strong drop by almost 4%. The collapse stopped in the range of 71.5-72, which has become a strong support for oil prices for the fourth time this year. In the previous 3 cases, it took no more than 2 trading sessions for the Brent quotes to bounce into the range of 73.5-74.5. Perhaps this time, the bulls will take advantage of the great drop in prices and create a new growth impulse.

 

The main reason for yesterday's massive sell-off in oil contracts was the revised forecasts from Goldman Sachs. Earlier the analysts of this bank were characterized by a steadily positive view on the prospects of the oil market. Probably that's why the significant reduction of oil price targets by Goldman Sachs caused such a negative reaction from traders.

 

Analysts lowered the forecast for Brent oil prices in the end of this year from 95 to 86 dollars per barrel, that is almost 10%. Goldman Sachs representatives pointed to the unexpectedly high level of supplies from Russia, Iran and Venezuela as the reason for such a dramatic change in estimates. The current level of oil exports from these countries exceeds previous forecasts of analysts by almost 800 thousand barrels per day.

 

However, it should not be forgotten that Saudi Arabia's production cuts have not yet started working, and it could offset the effect of increased supplies from other countries. Also a new forecast by the U.S. Energy Information Administration is notable. In July, U.S. domestic oil production is expected to rise by only 0.1%, which would be the smallest increase since December. This fact can either lead oil quotes to a steady rise, or at least limit the magnitude of the correction.

 

Monday's collapse resulted in a gap in the range of 74.5-74.7 on the daily chart of Brent oil. It will be the main target for the rebound in the next few days. The intermediate target is the level of 73.5.

 

 

The following trading strategy option can be suggested:

 

Buy Brent oil in the range of 72-72.5. Take profit 1 – 73.5. Take profit 2 – 74.5. Stop loss – 71.5.

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

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