Activity of the buyers in the oil market will not be enough for long

Brent oil quotes started the current week with a dramatic decline, during which they came close to the mark of $70 per barrel for the first time in a month. Low oil price together with the news background contributed to the price rebound, but this movement is unlikely to go beyond a short-term upward correction. At the moment, the return of the commodities price to the level of 73 is more probable than a new test of the resistance at 76.

The rebound in oil prices was caused by rising concerns about the situation in the Middle East, as well as uncertainty with OPEC+ plans. Reuters sources reported about the possibility of another postponement of planned output increase. The corresponding decision may be taken next week due to low demand for oil, as well as growing supply on the world market.

The latest data on oil production in the U.S. confirms these fears of the organization of exporting countries. Crude production set a new monthly high of 13.4 million barrels per day. Although the rate of output growth has fallen compared to previous years, a slowdown of the world economy threatens to cause an oil surplus. In particular, U.S. refineries are increasingly less in need of supplies from OPEC leader Saudi Arabia. Their value has fallen to a minimum since January 2021 at 235 thousand barrels per day.

Against this backdrop, analysts polled by Reuters again worsened their expectations for the oil price for this year and next year. According to new estimates, Brent crude would average $80.55 per barrel this year and $76.61 in 2025. In September, the price was forecast to be $81.52 and $76.94 respectively. As claimed by Ole Hansen of Saxo Bank, despite worries about tensions in the Middle East, the risk of real disruption to oil supplies remains very limited.

Brent oil prices still have some room for growth, but the bears can quickly regain the initiative and push the quotes down to 73.

The following trading strategy can be suggested:

Sell Brent in the range of 74.5–75. Take profit — 73. Stop loss — 76.