At the start of the new trading week, oil prices were surprisingly resilient to the latest developments in the Middle East situation, namely the United States becoming a direct participant in the conflict.
Brent crude opened with a modest uptick but retraced nearly all of its gains within a few hours. It appears that market participants do not see a significant increase in risk relative to the current price level. Stock index futures also remained steady, with no panic selling or explosive volatility.
Technically, this could mean that Brent prices will aim to return to $75.5 per barrel, as long as the Middle East situation doesn't get worse and oil shipping through the Strait of Hormuz isn't seriously disrupted.
Such an environment provides opportunities for the OPEC+ group to increase oil production, which will compensate for the loss of Iranian supplies and keep oil prices from exceeding the $80–85 per barrel range in the medium and long term.
The restraining effect on oil prices is also confirmed by declining production activity. The Philadelphia Fed's business activity index, published last Friday, dropped to 18.3 from the previous level of 47.2. The new orders index fell to 2.3 from 7.5.
The capital expenditure index almost halved, falling from 27.0 to 14.5.
The overall recommendation is to sell Brent crude.
Profits should be taken at the level of 75.5. A Stop loss could be set at the level of 81.0.
The volume of the opened position should be set in such a way that the potential loss (protected by the Stop loss) is no more than 1% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
