Brent crude oil prices continue to correct from the 4-month high seen earlier in the week, just above the $87 per barrel level. It is likely that the bears are planning to test the strength of the 83.5 level, which previously acted as a strong resistance and may now act as a support level. There is also a medium-term uptrend line, which increases the likelihood of an upside reversal. Fundamental factors are also in favour of oil buyers.
This week was marked by the CERAWeek conference, where industry representatives reaffirmed their optimistic view of the global oil market. Despite the growing popularity of electric vehicles and renewable energy sources, fossil fuel consumption will continue to rise for years to come. Russell Hardy, CEO of Vitol SA, said oil demand will not peak until the early 2030s due to lowered expectations for the pace of electric vehicle adoption.
Hardy also assessed the impact of tensions in the Red Sea on oil consumption. He estimates that global demand has increased by at least 100,000 barrels per day as a result of ships taking longer routes to bypass Africa. In addition, India is becoming an increasingly important player in the market and is set to overtake China in terms of oil demand growth over the next decade.
Based on the above factors, Gunvor Group analysts forecast that oil prices will remain in the range of $85-90 per barrel until the end of the third quarter of 2024. They expect Saudi Arabia to maintain current production levels: the Middle Eastern state simply has no other option to sustain an acceptable price level. At the same time, market participants do not take into account the extension of the current OPEC+ quotas for Q3, so oil still has potential for further growth.
An interesting option is to buy Brent near the 83.5 level and the uptrend line. If growth resumes, the next target for bulls will be the 86.5-87 area of local highs.
Consider the following trading strategy:
Buy Brent oil in the range of 83.5-84. Take profit - 86.5. Stop loss - 82.5.
This content is for informational purposes only and is not intended to be investing advice.
