Buying Brent with target of 73.5 amid lower market supply

Over the past two weeks, Brent oil prices have shown mixed dynamics. Brent futures mostly traded around the level of $71 per barrel. However, the prices opened at $72.23 per barrel early on March 21, rising from recent values.

The prices are under some pressure due to the expected supply growth on the back of increased production in Alaska. However, the prices are getting greater support from the Persian Gulf tensions and new restrictions against Iran, which may limit supply. Another package of US sanctions against Chinese refiners of Iranian oil could cut Iran's exports by 1 million barrels per day (bpd). This creates a potential shortage in the market, pushing oil prices higher.

Meanwhile, US oil inventories rose less than expected and did not hit the five-year average. A 0.5 million barrel decline in gasoline stocks indicates stronger domestic demand. The fall in inventories at the Cushing hub reinforces the bullish sentiment since it is a key gauge of domestic consumption. 

The prices are getting extra support from the new OPEC+ plan published on Thursday. The OPEC+ released a new timeline for the seven members on further production cuts to compensate for exceeding previously agreed levels. The monthly volume of these cuts will be between 189,000 and 435,000 bpd. The OPEC+ measures will last until June 2026. This plan eases market concerns about the expected increase in oil production from April.

As of March 21, there are signs of a trend change. After being in the negative zone, the MACD has begun to grow, signalling a possible transition from bearish to bullish sentiment. Indicators show that the drop is slowing down and there is a potential for recovery after a long slump. 

According to the Stochastic Oscillator, there is an uptrend in the market. The value of %K is 62.2460, indicating increasing activity of the buyers, but at the same time it does not reach the overbought level (80%). The crossing of %K with %D from bottom to top, which took place on March 20, was a buy signal.

Current recommendation:

Buy at the current price. Take profit — 73.5. Stop loss — 70.4.