BRENT CRUDE OIL (LCOc1) TALKING POINTS
- Bidens leaves Middle East without increased supply result.
- Russia’s political situation could see Nord Stream pipeline remain closed come Thursday.
BRENT CRUDE OIL FUNDAMENTAL BACKDROP
Brent crude oil extended last weeks Friday’s positive close in early trading on Monday morning after U.S. President Joe Biden’s visit to Saudi Arabia failed to deliver anything concrete. The trip was aimed at coaxing the Saudi’s to increase oil production thus easing inflation pressures. The response from the Saudi’s and other key officials reiterated the fact that production scheduling and/or increases remain with the OPEC+ consortium leaving President Biden without a deal. This being said, the upcoming OPEC+ meeting on August 3, 2022 could see a revision in the production outlook but with OPEC+ currently struggling to meet quota’s it is difficult to see how a higher figure could be met. Existing tight crude oil conditions are likely to endure acting as a support for elevated crude prices.
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Later this week (Thursday), the expected reuse of the Nord Stream 1 pipeline will be under the spotlight. If Russia does not bring the pipeline back online as anticipated, we could see energy prices soar as markets concerns around and energy crisis grows. The political uncertainty is a positive for brent crude prices for now but the demand-side fears from an indeterminate Chinese economy, global recession doubts and a strong U.S. dollar are keeping crude under control.
TECHNICAL ANALYSIS
BRENT CRUDE (LCOc1) DAILY CHART
Chart prepared by Warren Venketas, IG
Price action on the daily brent crude chart shows bulls reacting to Thursday’s extended lower long wick and now testing the 50% Fibonacci level at $101.29 (Taken from November 2021 low – March 2022 high). This move higher has kept the descending channel (blue) pattern in play as we look for a breakout.
Key resistance levels:
- $105.00
- 20-day EMA (purple)
- $101.29
Key support levels:
- $96.63
- $92.90 (61.8% Fibonacci)
IG CLIENT SENTIMENT: BEARISH
IGCS shows retail traders are NET LONG on Crude Oil, with 63% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment resulting in a short-term downside bias.
Contact and follow Warren on Twitter: @WVenketas
