Bullish sentiment on Brent strengthens amid expectations of resistance breakout

On Friday, the Brent price continued rising for the third consecutive week, which may become the best result since July. The main factors of strengthening are the decrease in US oil reserves, demand growth due to cold weather and reduction of supplies from Russia. Inventories at the Cushing, Oklahoma fell to their lowest level since 2014, adding to market tightness. Meanwhile in China, consumer inflation fell to zero, underscoring problems in the economy and challenges for the authorities to stimulate it.

An additional driver for the oil price remains the return of Donald Trump to the US presidency. This adds to geopolitical uncertainty, raises risks to oil supplies disruptions from Iran and increases the chances of trade instability affecting energy flows.

The spread between the nearest Brent contracts widened to 70 cents per barrel. This confirms the bullishness in the market, as the spread was 29 cents a month ago. Trump is expected to unleash more drilling on federal lands and impose tariffs on Canadian oil imports after his inauguration on January 20, which adds to market volatility.

From a technical point of view, the Brent price is in a downtrend on the D1 timeframe. Approaching the resistance of the channel the price may stabilize. However, the breakthrough of the resistance curve amid favorable fundamental factors can create conditions for the formation of a new upward trend. Moving Average of Oscillator (with parameters 12, 26, 9) is above zero, signaling the remaining potential for price growth.

The short-term outlook for Brent is to buy with the target at 84.00. Part of the profit could be fixed near the level of 80.10. The Stop loss could be placed at 73.00.

The bullish trend is of a short-term nature, so it’s suggested to limit the trading volume to no more than 2% of your capital.