Yesterday, Brent oil price rose above the level of $80 per barrel for the first time since late April. The positive background in the market stimulated purchases of oil and other commodities. Keeping the price at 80 will be a signal of continued growth for the oil market bulls. If the price immediately consolidates on the achieved tops, the next target will be the range of 82–83.
Data on the June inflation in the US showed a slowdown in price growth to the lowest level in more than two years. Market participants are hoping for the Federal Reserve's interest rate hike cycle to end soon. This has a positive impact on the energy demand.
At the same time, global supply of oil will remain limited. The Energy Information Administration has lowered its forecast for the US oil production in 2023 by 50 thousand bpd to 12.56 million bpd. This will strengthen the impact of the OPEC's decision to cut oil production until 2024.
These factors will lead to a decline in global oil inventories over the next five quarters. As a consequence, global fossil fuel prices will rise in the second half of 2023 and early 2024. The crude oil market will tighten due to high demand for oil from China and other developing countries. At the same time, given OPEC+ announcements on production cuts, supply is likely to remain low.
The price of Brent oil has formed a short-term uptrend, supporting the fundamental factors of the price growth. Meanwhile, the RSI is close to the overbought zone, but there’s no signal for a reversal. There might be a correctional pullback when the price rises to the range of 82–83. At least part of the profit should be fixed at that level.
The following trading strategy can be suggested:
Buy Brent oil in the range of 80–80.5. Take profit — 82. Stop loss — 79.
Traders can also use a Trailing stop instead of a fixed Stop loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.
