Brent oil has been under selling pressure this week, having lost half of its gains since the start of the Middle East conflict. Nevertheless, drawdowns below the level of 87 are consistently being bought back, which indicates that the bulls are still active. Both fundamental and technical factors suggest a gradual stabilization of oil prices in the current trading range. For Brent it means approaching the 90 mark.
Kpler analysts still believe the main reason for high oil prices is OPEC+ production cuts. According to preliminary data, the Organization of Exporting Countries will reduce the oil supplies to the United States in October from 2.92 to 2.47 million barrels per day. Most notably, exports will be reduced by Saudi Arabia (by more than 40% compared to October 2022), as well as Nigeria and Algeria.
As a result of falling supply levels from OPEC countries, the US has to leave more oil for the domestic market and reduce its exports to Europe. In September, American companies reduced oil supplies to European countries by 150 thousand barrels per day, and by the end of October, Kpler representatives expect to see comparable figures. Due to the shortage of WTI oil, buyers from Europe will have to increase consumption of Brent.
At the same time, Standard Chartered analysts urge not to forget about the rapidly declining global oil reserves. According to their estimates, in the 3rd quarter of 2023 the reserves have already decreased by 172 million barrels, and in the 4th quarter will decrease by another 120 million barrels. The SCORPIO price forecasting model used by Standard Chartered suggests that Brent oil prices will rise to $91.3 per barrel next week.
On the daily chart of Brent oil, the Stochastic indicator has almost reached the oversold zone and will soon signal a reversal. The 89.5 mark might be identified as the nearest growth target.
Consider the following trading strategy:
Buy Brent oil in the range of 88-88.5. Take profit - 89.5. Stop loss - 87.
Traders may 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.
