Brent Oil Starts the New Week on the Back Foot

The first is a de-escalation of the Russia-Ukraine conflict and the second is optimism about talks with Iran. Without going into details, let’s look at this from a supply and demand point of view.

So, the ease in Europe, means a lower threat for supply and a bigger supply means a price drop. Iran talks have the same effect but they don’t lower the threat for supply, they potentially open new sources of supply. The outcome is the same though; potentially more oil on the market, that’s why, the price of oil is currently dropping.

Enough fundamentals, let’s look at the chart. The price is still in the channel up formation (blue lines) and actually the price is bouncing off its lower line as we speak. As long as the price remains inside the channel up formation, there’s no legitimate sell signal here. The sell signal would be triggered only when the price closes an H4 candle below the lower line of this formation. If that happens, the first target will be 89 USD/bbl (violet) and the second one will be 85.7 USD/bbl (yellow). The second is much more important from a technical point of view – those were the tops from the end of last year.

To sum up, despite the latest negative switch in fundamentals, buyers are still holding the price in a bullish territory. It would be premature to call a sell signal, when the price is still in a channel up formation. For the proper short opportunity, we need to see a breakout of the lower blue line first, without that, the bullish trend remains intact.

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