Brent crude oil prices received fundamental support after a significant decline in US oil inventories. The American Petroleum Institute (API) reported that crude stocks fell by 9.2 million barrels last week.
If these data are confirmed later tonight by the official statistics, it will be the biggest drop in oil inventories since January.
In addition, the rising stock market and related increase in manufacturing activity in the G-10 countries is boosting oil demand, thereby also supporting prices.
Concerns about a potentially active hurricane season have also decreased.
Geopolitical risks are up as well, with investors monitoring elections in France and the UK. In the Middle East, an escalating conflict between Israel and Hezbollah along with Iran’s potential involvement could severely destabilize the situation, putting existing oil transportation corridors at risk. This also contributes to the price growth.
At the same time, the market may have already considered all these factors in the price and is now ready for a small technical correction to confirm the support levels. According to CME Group data, the Call/Put ratio remains bullish, but the past day’s changes suggest a sharp increase in the volume of put options with expiration in mid-July. Thus, over the previous day a total of 4,111 contracts were announced for sale and remained uncovered, while the number of uncovered contracts for purchase reduced by 97. So, there is a huge overhang of selling positions, which the market is likely to take into account in the coming days.
From a technical perspective, the support level of Brent oil which the market will try to retest is $86 per barrel.
The overall recommendation is to sell Brent crude oil.
Profits should be taken at the level of 86.0. A Stop-Loss could be set at the level of 87.5.
The possible loss should not exceed 2% of your deposit funds.
