Brent crude oil prices hit their 3-month highs in July. Oil gained more than 13% and climbed close to April highs of the 86.5-87.5 range. At the same time, there have been no significant corrections for more than 2 weeks, and approaching spring highs may strengthen the desire of oil market participants to take profit. But as long as prices remain within the uptrend, bears can hardly expect a significant drop.
Despite some analysts' initial skepticism, OPEC+ oil production cuts still outweigh the effect of slowing global economic growth. In July, the organization of exporting countries reduced production of oil by 840 thousand barrels per day (bpd) to its lowest level since September 2021, according to Reuters. Saudi Arabia has yet to meet its target of a 1 million bpd production cut, but this has been partially offset by production problems in Nigeria and Libya.
It is likely that Saudi Arabia still intends to fulfill its pledge to cut oil production. The country may also extend the reduced production levels into September. This is expected to be announced on August 4 at the OPEC+ Joint Ministerial Monitoring Committee meeting. The data on the new oil price increase from Saudi Arabia speaks in favor of the emerging supply shortage.
Meanwhile, the U.S. Energy Information Administration (EIA) released a report on the oil and gas sector for May. The country's field production of crude oil fell to 12.66 million barrels per day, the lowest since February. At the same time, U.S. product supply of crude and petroleum products - a proxy for demand - rose to its highest level since August 2019. Such statistics also suggest that the uptrend in oil prices remains intact.
The RSI indicator has approached the overbought zone, but has not yet formed a reversal signal. Sellers are likely to be active in the 86.5-87.5 range, which Brent oil prices may reach in the coming days.
Consider the following trading strategy:
Buy Brent crude oil in the 84.5-85 range. Take profit 1 – 86.5. Take profit 2 – 87.5. Stop loss – 83.5.
This content is for informational purposes only and is not intended to be investing advice.
