Brent crude oil has advanced to its highest trading level since October 2014, as tightness in the physical oil market propels Brent increasingly close to the $90.00 resistance level.
Last week the EIA showed dwindling oil supplies, but more importantly OPEC members are currently not providing enough supply to meet strong global demand, which is behind the bulk of the move higher.
Moreover, the differentials to crude oil future prices of a number of key Atlantic Bassin crude oil grades jumped to 18-month to two-year highs last week. The momentum has spilled over to this week.
The recent news of an upcoming coordinated crude oil reserve release by China and the US as well as a recovery back to normal output levels in Libya hasn’t been able to substantially hurt prices, in fact the opposite is true this week.
Other risks also remain, such as the concerning number of new infections from COVID-19 Omicron in Beijing. A number of new cases have also been found in mainland China ahead of the Olympics.
Make no mistake, if China were to report a significant amount of cases and move to lockdown mode it would have a heavily negative effect on Brent Crude and commodity prices.
According to the ActivTrader market sentiment tool just 12 percent of traders are bullish towards crude oil, leaving plenty of scope for a further upside, as retail traders appear to be on the wrong end of the recent move.
Brent Crude Oil short-term Technical Analysis
The lower time frames currently show that Brent Crude oil is in a strong bullish trend, with Brent trading nearly $10.00 away from its 200-period MA on the four-hour time frame.
Bearish MACD price divergence has formed, and is present down towards the $83.00 level, which eventually leaves plenty of scope for a healthy correction to the downside at some stage.
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Brent Crude Oil medium-term Technical Analysis
The daily time frame shows that Brent oil has formed a massive, inverted head and shoulders pattern, and we could see substantial price rise over the coming days and weeks.
Brent Crude oil has the potential to stage a massive rally above the $100.00 benchmark level over the medium-term horizon while the price trades above neckline support, around $85.00.
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