Oil market fundamentals indicate a potential decline in oil prices in the medium term, including Brent.
A closer look at the situation in terms of technical analysis shows several key points:
Brent prices have been forming a shelf pattern on the weekly timeframe since the spring of 2023 at the level of $71 per barrel. The idea of the pattern is that the price sets highs each time at different levels, while the lows are located on the same horizontal support line. Historically, this support line, which is the very same shelf pattern, is broken down sooner or later with the subsequent exit of the price to the next support line.
And this next line, below $71, is at $65 per barrel. It is worth noting that this level has been forming since 2014, i.e. for more than 10 years. The Brent price has repeatedly approached it during that time, breaking through it and then coming back again and again, from above and below.
Whenever the price tries to overcome the support level, it becomes weaker as the volumes of Buy and Sell orders set at this level are eventually executed and there is no momentum for a rebound from this level.
It is possible that the expected breakdown of the 71.0 level followed by a downward movement to 65.0 will take place in the coming days or weeks. It is also possible that the 71 level will resist again, and the price will rebound in order to break it a bit later.
The monthly OPEC report will be published today, which is likely to worsen the outlook for global oil demand. The release of this report may be a trigger for a strong momentum to break the 71.0 level.
The overall recommendation is to sell Brent in the medium term.
Profits from selling Brent should be taken at the level of 65.00. A Stop loss could be set at the level of 77.0.
The possible loss should not exceed 2% of your deposit funds.
