Brent crude oil price has stabilized a bit in the past two weeks as concerns about demand and supply remains. It rose for two consecutive weeks, reaching a high of $66.85, an increase of over 14% from its lowest level this month. So, is it safe to buy or sell Brent at the current prices?
Iran and US deal hopes
A potential risk for Brent crude oil price is that the US is in negotiations with Iran on its nuclear power program.
The two sides have cited progress, and analysts believe that they will reach a deal. That’s because Trump wants a deal to prevent Tehran from advancing its nuclear program. Iran also wants a deal as that will help its economy by removing sanctions.
Also, there are signs that Iran is afraid of a war in the country now that its outposts like Hamas, Hezbollah, and Houthis have been crashed. Most importantly, Iran is afraid of Trump’s threats to bomb its nuclear sites.
Notably, there are signs that Saudi Arabia supports the ongoing talks, a sharp contrast to its rejection of the Barack Obama-negotiated deal.
Therefore, a resolution of the Iranian nuclear deal will mean that millions of barrels of oil in the market.
On the other hand, there are signs that the much-anticipated deal between Russia andthe US is not close as the war has continued. In a statement last week, Secretary Marco Rubio said that Trump was prepared to end his negotiations for a truce, a move that would benefit Russia.
Such a move would cap oil supply as that would mean that Russia maintains a weaker presence in the oil market. For one, Trump has hinted that he will be ready to apply secondary sanctions on buyers of Russian crude oil.
Crude oil demand challenges
Brent crude oil price has also reacted to other demand and supply dynamics in the energy industry. Most analysts believe that demand will be weak this year, particularly if the global economy enters a recession.
The Energy Information Administration (EIA) and the International Energy Agency (IEA) have slashed their demand estimates this year. The IEA reduced its demand forecast by a third from 1 million barrels per day to 730,000. That will bring the daily demand of about 103.5 million barrels.
The EIA, on the other hand, also lowered its demand estimates to 900k barrels, down from the previous estimate of 1.2 million barrels.
However, there is a risk that the EIA and IEA are overstating the impact of the trade war on demand. That’s because people will always travel, meaning that the daily demand will remain steady over time.
Brent crude oil price analysis
The weekly chart indicates that the Brent crude oil price has been in a strong downtrend over the past few months, declining from the year-to-date high of $82.42 to its current level of $66.78.
It has moved below the key support level at $70, the upper side of the descending triangle pattern. A descending pattern is one of the most popular bearish continuation signs in the market.
Brent appears to be forming a break-and-retest pattern, a popular continuation sign. This retest will happen when the stock rises and retests the resistance at $70.
It has also remained below the 50-week and 25-week moving averages. Therefore, there is a risk that the Brent crude oil price will continue falling, as sellers target the year-to-date low of $58.
Measuring the widest part of the triangle shows that it is about 28%. Therefore, measuring the same distance from the triangle’s lower side brings the next target at $49.63.
Source: Invezz / Digpu NewsTex