Brent Crude – Time for a correction?

Rally lost momentum

Brent crude has been running low on momentum in recent days and may be primed for a corrective move.

The fundamentals have become increasingly bullish for oil prices as the weeks have passed, from a strong economic recovery to a carefully managed return of output from OPEC+ and now, an energy crisis that has increased oil crude demand by 500,000 barrels per day.

A year and a half after oil prices went negative, $100 a barrel is realistically in sight and OPEC+ is doing little to stop it. After a strong surge, prices are starting to see some resistance though after Brent peaked above $86.

The pullback we’ve seen today has brought the price to an interesting support level . As you can see on the 4-hour chart, the bottom of the 55/89-period SMA combines with fib levels and the rising trend line , which could provide support around $83.50.

This would be a very shallow corrective move, but it has been a very powerful rally in recent weeks so that wouldn’t come as a great surprise.

That said, the momentum indicators recently have shown a divergence with price which may suggest a larger correction is on the cards, with $83 the next test but $80-81 being the next major barrier to the downside.

A move below $84 ( ish ) would also represent a break of a double top neckline, which could support a deeper correction before interest potentially appears once more.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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