Oil price drivers are only short-term in nature

In the early part of 2024 Brent oil is trading in a flat with the boundaries of $75 and $80 per barrel. On Thursday, the movement to the upper boundary began, and today buyers are trying to hold the level of 79. At the same time, the potential for a short-term growth wave is seen as limited, and December highs near the level of 81 may act as a limit. Fundamental factors are not enough for a more significant increase in oil prices.

According to analysts of Citi Research, tension in the Middle East could cause a local rise of oil price, but no more than that. Pricing in the global oil market is still based on the balance of supply and demand. From this point of view, fears of surplus and overproduction of raw materials retain their pressure on prices. As a result, Citi analysts worsened their forecast for the price of Brent: from $75 to $74 per barrel for the current year, and by $10 at once for 2025 (to $60 per barrel).

The latest statistics from the U.S. also testifies to the weak demand from oil products consumers. Gasoline stocks last week increased by 8 million barrels, 4 times more than expected. As a result, U.S. gasoline reserves reached the annual maximum, and diesel fuel reserves reached the highest value since 2021.

News from India also contributed its share of negativity. The country's authorities didn’t allocate money to replenish the strategic oil reserve, which has decreased by 30% compared to the maximum levels of 2020. The struggle to reduce the budget deficit for the Indian government turned out to be more important than improving energy security. In this regard, the global demand for oil is deprived of one of the potential support factors.

Traders could open short positions on Brent oil above the level of 79. The target in this case would be the return of the Brent oil price to the level of 77. The scenario remains valid until the price breaks through the level of 81 from below.

The following trading strategy can be suggested:

Sell Brent oil above the level of 79. Take profit — 77. Stop loss — 81.

Traders can also use a Trailing stop instead of a fixed Stop loss at their discretion.