Brent oil prices were actively falling in the first half of this week, attempting to return to the yearly low of 75. However, during Thursday's trading session, buyers of oil fought back the bears and halted the downward movement in prices. A double bottom pattern may be forming on the daily chart of Brent, indicating a return to the neckline near the 81 level. If there is no further sell-off in oil contracts today, the chances of the growth scenario being realized will increase significantly.
Citi Research analysts recommend that traders take advantage of the new drop in oil prices to open long positions. According to them, the rebound has all chances to reach the $80 per barrel mark, and further bulls can test the 200-day moving average near the 82.5 level. The bank's experts believe that the easing of geopolitical tensions in the Middle East is only temporary, and that the hurricane season in the Gulf of Mexico could still bring unpleasant surprises for U.S. oil exporters.
Citi's experts are also paying attention to OPEC+ plans to increase crude oil production starting in October. This move could potentially lead to a surplus in the global oil market and another wave of falling gold prices. In this regard, the Organization of Exporting Countries and its allies will be very cautious on the issue of easing production quotas. It is quite likely that it will abandon this decision in case of unfavorable market conditions.
Reuters analysts recall that OPEC+ representatives expressed many reservations at the time of the June announcement on increasing oil production. In particular, a sharp drop in prices and weak demand could lead to the postponement or even complete cancellation of the existing plan. If the cycle of interest rate cuts by the world's central banks does not lead to a rapid recovery in economic growth, oil supply will remain unchanged and will not weigh on prices.
The Stochastic indicator confirms the high probability of a reversal in Brent oil prices towards growth. The short-term upside target is 81.
Consider the following trading strategy:
Buying Brent oil in the range of 77–78. Take profit — 81. Stop loss — 75.5.
This content is for informational purposes only and is not intended to be investing advice.
