On Tuesday, Brent crude oil futures (MOEX: BR) found stability, putting the brakes on a recent downward trend sparked by uncertainties surrounding OPEC+’s voluntary output cuts. After some initial postponement due to supply disagreements, the organisation eventually committed to a substantial cut of 2.2 million barrels per day (bpd) for the first quarter of 2024. Notably, a significant portion of this reduction, about 1.3 million barrels, is essentially an extension of pre-existing constraints imposed by Saudi Arabia and Russia.
Initially met with scepticism regarding their impact on oil prices, these cuts gained some backing from Saudi Arabia’s energy minister, who hinted at the possibility of prolonging production restrictions beyond Q1 2024. This positive sentiment is complemented by persistent tensions in the Middle East and lacklustre economic indicators from the US, creating favourable conditions for a potential market rebound.
Looking ahead, the EIA inventory report on Wednesday and the NFP report on Friday emerge as key players in shaping the market landscape for the week. These reports hold the potential to drive significant price movements, offering traders an exciting opportunity for directional action in the latter part of the week.
Technical
On the 4H chart, a symmetrical triangle has emerged before a bullish breakout breached the dynamic resistance. However, a pullback occurred soon after, retracing the gains fully before moving below the original triangle support. The retreat left the futures trading below the 25-SMA (green line), which has recently converged with the 50-SMA (blue line), as well as the 100-SMA (orange line), which trades slightly above.
With a demand zone established at $78.71/barrel (BLL), the futures found support, where the price is now consolidating. Resistance at $79.90/BLL is the first potential hurdle to the selloff’s retracement. If the buyers can clear this level, the retracement could kick-off, with the market potentially looking toward $80.57/BLL and $81.12/BLL as key interest levels. The multiple SMAs could offer stern resistance just above this level, making it a challenging one to cross.
Alternatively, the downtrend could intensify if the market fails to clear $79.90/BLL. Below the demand zone that currently underpins the price, neckline support is established at $78.02/BLL, which could be pivotal in the upcoming sessions.
Summary
With Brent crude oil futures stabilising after a severe downturn triggered by OPEC+ supply uncertainties, all eyes will turn toward the inventories report and NFP data later this week. The resistance at $79.90/BLL could be crucial in the upcoming sessions, providing resistance to a potential retracement of the recent selloff.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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