At the end of the week, Brent oil prices continue to trade in a narrow range in anticipation of the report of the International Energy Agency (IEA), which should assess the state of the oil market. The publication of ambiguous indicators in China also doesn’t contribute to the growth of the fuel price.
According to the monthly report of OPEC, a strong decline in supply on the world markets is expected in the current quarter. According to the document, the deficit will exceed the daily figure of 2 million barrels due to the production cuts by Saudi Arabia.
Fuel prices have been rising since the end of June due to the reduction of oil output by the kingdom. Russia’s reduction of oil export also contributes to the decrease in global supply and higher prices. However, weak economic growth in China is still a significant problem.
At the same time, US Federal Reserve (Fed) interest rates may remain unchanged due to signs of slowing inflation. This will create more favorable conditions in the oil market.
In addition, Iran has made the first step of an emerging deal between Washington and Tehran. This agreement could lead to an increase in fuel supplies from the OPEC oil producer.
The Brent oil chart shows a pullback from the 87.50–89.10 range, which has been turning prices southward for eight months.
Very strong fundamentals are needed for an upward breakout of this range.
According to Tina Teng, an analyst at CMC Markets, oil markets are in an overbought zone. However, OPEC+ production cuts in the coming months and improved demand outlook from China could become bullish factors for the commodity market.
According to the technical analysis, a downward pullback of the oil price is needed to increase long positions in the future.
The price is forming an uptrend on the H4 timeframe.
The RSI (standard values) shows divergence. This divergence gives a leading signal of a change in the trend. In the short term, the price is expected to go beyond the ascending support line.
The short-term outlook for Brent crude oil is to sell.
The target is at the level of 82.80.
Part of the profit should be fixed near the level of 85.00.
A Stop-loss should be placed near the level of 89.40.
The bearish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.