Brent oil prices continued to recover this week, moving away from the 3-year low below $70 per barrel. The outcome of the Fed meeting caused a local drawdown, but yesterday it was fully bought back. The rebound in the oil price hasn’t yet exhausted the short-term growth potential. The bulls will probably start taking profit near the level of 76, which was a good support in August.
The rise in oil prices is in line with the general dynamics of financial markets. The sharp easing of the Fed's monetary policy positively affects the prices of commodities expressed in dollars. In addition, Reuters analysts highlight the fact that commercial oil reserves in the United States have achieved the annual minimum. Even with pessimistic commodities demand forecasts this fact supports the prices.
Meanwhile, the U.S. authorities again took advantage of falling oil prices to replenish the Strategic Petroleum Reserve (SPR). The U.S. administration will seek up to 6 million barrels of oil for the SPR in the first months of 2025. The purchase volume could be the highest in recent years. The U.S. Department of Energy has confirmed its intention to continue replenishing the SPR as long as crude oil prices remain below $80 per barrel. Thus, demand may exceed the expectations of market participants.
Analysts at JPMorgan and Citigroup see an opportunity for a further rise in oil prices. According to their estimates, the decision of OPEC+ to delay oil output hike will lead to oil shortage of 400,000 bpd by the end of 2024. Problems with production in Libya also contribute to the commodities shortage. JPMorgan experts believe that Brent price can easily return to the peaks of August, especially if the cycle of interest rate cuts will have a rapid effect and lead to an acceleration in global economic growth.
The nearest target of buyers in the oil market is to reach the level of 76 for Brent. Further prospects for an upward movement will depend on whether the price manages to consolidate above this level.
The following trading strategy can be suggested:
Buy Brent at the current price. Take profit — 76. Stop loss — 73.
This content is for informational purposes only and is not intended to be investing advice.
