Brent Crude Oil Futures (NYMEX: BZ) have charted a nuanced path, gaining just over 4% year-to-date, primarily propelled by supply-side concerns.
Ongoing geopolitical tensions in the Middle East have cast shadows on key global shipping routes and amplified uncertainties in one of the globe’s major oil-producing regions. Simultaneously, challenges persist in the U.S., with extreme cold and operational issues keeping 20% of North Dakota’s oil output offline.
However, the upward trajectory faces headwinds from demand concerns. China, a pivotal oil importer, grapples with a subdued post-pandemic economic rebound, dampening oil demand prospects. Additionally, as per the U.S. Energy Information Administration, a three-week streak of inventory builds signals weakened demand. The imminent release of the PCE Price Index, a pivotal inflation gauge for the Federal Reserve, is set to reveal whether the current elevated interest rates will persist, possibly exerting an influence on the oil demand.
Technical
The Brent Crude Oil Futures have displayed resilience in the face of recent market fluctuations, with only a minor dip in prices over the past three weeks.
Despite currently trading below the 100-day moving average on the Daily chart, a promising shift is evident on the 4-hour chart. Bullish signals emerge as the oil futures surpass the 100-day moving average within an ascending channel pattern.
The $74.79 per barrel (BLL) level has proven to be a robust support, marking a rebound from oversold RSI conditions. However, the oil futures remain within the ascending channel’s confines as they approach the $81.71 BLL resistance level, formed during a late December selloff amid overbought RSI conditions.
The potential retest of this resistance level hinges on the persistence of upside momentum. Conversely, attention is drawn to the $78.00 BLL level, aligning with the moving average and forming a swing low within the ascending channel, presenting a plausible downside point of interest.
Summary
The Brent Crude Oil Futures have rebounded amidst geopolitical tensions and supply-side challenges, gaining 4% YTD. However, demand uncertainties from China’s economic growth slowdown and a three-week inventory build pose hurdles. Technical analysis reveals a minor dip, with an optimistic shift as bullish signals arise within an ascending channel. Key levels at $74.79 provide support, while the $81.71 resistance awaits a potential retest.
Sources: Reuters, Observatory of Economic Complexity, U.S. Energy Information Administration, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
