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Brent Crude Oil Opens Higher While Markets Await Re-Test of $100 Level

Brent Crude Oil Opens Higher While Markets Await Re-Test of $100 Level

Warren Venketas, Analyst

BRENT CRUDE OIL (LCOc1) ANALYSIS

  • 120m barrels to be released by IEA member states.
  • Dollar continues upside move.
  • Ascending triangle support zone under consideration.

CRUDE OIL FUNDAMENTAL BACKDROP

Brent crude extended its bearish trajectory this morning after the International Energy Agency (IEA) outlined details around its member states coordinated strategic release to quell soaring crude oil prices and increase global supply. A list of the countries involved along with their respective contributions are tabled below:

COUNTRY

BARRELS (1000s)

US

60559

Japan

15000

South Korea

7230

Germany

6480

France

6047

Italy

5000

UK

4408

Spain

4000

Turkey

3060

Poland

2298

Australia

1608

Netherlands

1600

Greece

624

Hungary

531

New Zealand

486

Ireland

451

Finland

369

Lithuania

180

Estonia

74

Source: Refinitiv

Since then, brent crude has hovered around the psychological $100/barrel mark after a failed break in mid-March.

In addition, an increasingly hawkish Federal Reserve has spurred the Dollar Index (DXY) higher towards the 100 mark weighing on crude oil (historically inverse relationship with oil). From the demand-side, China’s lockdown measures as a result of COVID-19 has hampered forecasts leaving oil prices open to further weakness.

Learn more about Crude Oil Trading Strategies and Tips in our newly revamped Commodities Module!

With the economic calendar fairly light today, the rest of the trading session going into the weekend will be driven by geopolitics as well as any unexpected fundamental oil news.

TECHNICAL ANALYSIS

BRENT CRUDE (LCOc1) DAILY CHART

daily brent crude chart

Chart prepared by Warren Venketas, IG

After breaking below the symmetrical triangle pattern (black) crude oil price action. now seeks to push below the $100/barrel key area of confluence which has developed the symmetrical into what seems an ascending triangle with a firm line in the sand (red) delineating triangle support. Traditionally, the descending triangle is a bearish continuation pattern, and with fundamentals positioned against crude oil, the pattern may well unfold as expected. This being said, in the medium/long-term I foresee the recent deployment by the aforementioned IEA member states as a short-term solution to a long-term problem as mentioned in my interview with IGTV earlier this morning.

Key resistance levels:

  • $120.50
  • $109.03/20-day EMA (purple)
  • 50-day EMA (blue)

Key support levels:

  • $100
  • 100-day EMA (yellow)
  • $95.59
  • $91.83

IG CLIENT SENTIMENT: MIXED

IGCS shows retail traders are marginally NET LONG on Crude Oil, with 65% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, after recent changes in positioning the bias remains uncertain.

Contact and follow Warren on Twitter: @WVenketas

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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