Brent prices require correction after three weeks of gains

Brent crude oil prices seek to finish March where they started the month, near the level of 73. With the arrival of spring, the prices updated a three-year low before rebounding upwards by more than 7%. This period has not seen a single real correction. Technical indices show the strongest overbought reading since mid-January. A pullback in the oil prices is coming, and its first target may be the level of $72 per barrel.

The market sees the price recovery as a result of concern over tighter oil supply from Iran and Venezuela. However, Bloomberg points that such withdrawals are premature. According to the agency, Venezuela's exports will traditionally be diverted to China during the period of deterioration of relations with the US. At the end of March, supplies to China may reach 400 thousand barrels per day, a record level since June 2023.

Citigroup analysts believe that in the worst case scenario, the US restrictions will slash the oil supply on the global market by 0.5–0.7 million barrels per day. This is not a serious problem, especially since OPEC+ will proceed with the long-awaited increase in crude output in April. In any case, there will be no oil deficit, so the prices should not be expected to rise significantly from the current levels.

Citigroup reports a sharp slowdown in the pace of opening long positions for oil this week. After buying back the March drawdown, traders no longer see much potential for further price increases. The bank sticks to its previous forecast of Brent moving in the range of 60–75 dollars per barrel in 2025. With the quotes close to the upper boundary of this range, it is now reasonable to consider selling oil.

Overheated RSI and Stochastic indicators confirm the signal to a decline in Brent prices. Bears will focus on the level of 72 in the short term.

Consider the following trading strategy:

Sell Brent in the range of 73–73.5. Take profit – 72. Stop loss – 74.2.