Oil prices reach local bottom and head for rebound

Throughout the current week, Brent oil prices have been moving downwards, losing ground amid easing geopolitical tensions in the Middle East. After a 7% drop in the oil price, now there are fewer traders willing to continue selling, which is evident from the long lower shadows of the last candlesticks on the daily chart. Perhaps, market participants are no longer seeing any potential for further price declines and are getting ready for an upward rebound. In this case, the nearest target of the bulls will be the return of the oil price to the level of 76.

Despite the current pessimistic background, yesterday the UBS analysts confirmed their forecast of Brent exceeding the level of $80 per barrel. Although OPEC and IEA have reduced their estimates of global demand growth for crude oil, its production won't meet expectations either. Thus, the IEA representatives now suggest an increase in output of crude oil of less than 700 thousand barrels per day, which is almost twice less than last year's figure.

According to the UBS experts, global oil reserves started reducing in June, and this trend has been continuing until now. Even the obvious weakness of demand in China did not prevent this happening. And now, given the large-scale monetary policy easing in China and other major economies, the consumption of energy resources may increase significantly. In this context, the $80 level may be crossed in the coming weeks.

The analysts from Vortexa also point out the sharp decline in oil exports from Iran. In October, supplies to the world market from this country dropped by 2/3, from 1.8 to 0.6 million barrels per day. According to Vortexa estimates, even if Iran manages to restore regular loading and dispatch of tankers in the remaining time, the monthly export figure is unlikely to exceed 1.35 million barrels per day. This will support the price of oil.

The Stochastic indicator on the daily chart of Brent oil has come close to the oversold zone and may soon signal an upward reversal. The short-term target for buyers is at the level of 76.

The following trading strategy can be suggested:

Buy Brent oil at the current price. Take profit – 76. Stop loss – 73.5.