On Monday, the Brent Crude Oil Futures (MOEX: BR) experienced a notable dip of over 3%, triggered by Saudi Arabia’s decision to slash their official selling prices for oil deliveries. This move raised concerns within the market about the existing demand landscape. However, a shift occurred during Wednesday’s session, revealing a change in sentiment.
The market began reclaiming some of its earlier losses, driven by ongoing geopolitical tensions in the Middle East, keeping output risks in focus. Adding to the complexity, Libya’s Sharara oilfield has been idle since last week due to political protests, removing 300,000 barrels of oil per day from the market. With these factors influencing the delicate balance of supply and demand, the future of oil futures appears poised for significant volatility as we move forward.
Technical
On the 4H chart, a descending triangle is present, with the futures trading close to the dynamic resistance, which is backed by the 25-SMA (green line) and the 100-SMA (orange line). Trading volumes have become thin, and the RSI indicates neutrality in the market, suggesting the possibility for low trading ranges as we await further economic data.
However, if the futures break through the dynamic resistance of the triangle, the Fibonacci midpoint at $78.82/barrel (BLL) could pose a threat to the breakout’s sustainability as it converges with the 50-SMA (blue line). However, if this level gets cleared, the futures could test the 61.8% Fibonacci golden ratio at $79.51/BLL. While a retracement could be catalysed at this level, upside potential remains, with a supply zone at $80.48/BLL becoming a level of interest.
Conversely, if the futures fail to breach the dynamic resistance of the triangle, a pullback toward $77.28/BLL becomes likely. The triangle support at $76.59/BLL then offers the last line of defence to the breakdown, which could drive the futures down to $75.91/BLL.
Summary
After a rocky start to the week, the Brent Oil futures have clawed back some of their losses and threatened a breakout from the descending triangle near the 25-SMA and 100-SMA. Low ranges are likely until further economic data becomes available, which could trigger a newfound direction for the oil price.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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