July Brent Crude Oil Strugging to Overcome $108.06 – $111.64 Retracement Zone

International-benchmark Brent crude oil futures are trading nearly flat early Tuesday as traders digest the dramatic reversal to the upside on Monday that caught many short-sellers by surprise. Reuters is reporting that the volatile price action was likely fueled by a rally in the diesel market and fears that supply might be crimped by a potential European Union ban on Russian crude.

At 04:48 GMT, July Brent crude oil futures are trading $107.34, down $0.24 or -0.22%. On Tuesday, the United States Oil Fund ETF (USO) settled at $78.40, up $1.24 or +1.61%.

Traders Eyeing Low Diesel Supply

Diesel futures continued to rally after rolling over to the June contract on Monday, rising 5% to $4.0172 per gallon as a low supply of inventories globally put upward pressure on WTI and Brent prices.

Deal by EU to Ban Russian Oil Import Hits Potential Snag

July Brent crude oil retreated early in the session on Monday on news that the European Commission may spare Hungary and Slovakia from a Russian oil embargo as it prepares to finalize its next batch of sanctions on Russia on Tuesday.

Nonetheless, the EU is still leaning toward banning Russian oil imports by the end of the year, according to two EU diplomats, after talks between the European Commission and EU member states over the weekend.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $113.56 will signal a resumption of the uptrend. A move through $99.25 will change the main trend to down.

On the upside, resistance is a retracement zone at $108.06 to $111.64. On the downside, support is a retracement zone at $104.08 to $101.43.

Daily Swing Chart Technical Forecast

The direction of the July Brent crude oil market on Tuesday is likely to be determined by trader reaction to $108.06.

Bullish Scenario

A sustained move over $108.06 will indicate the presence of buyers. The first upside target is the minor top at $110.01, followed by a Fibonacci level at $111.64.

Overtaking $111.64 will indicate the buying is getting stronger. This could lead to a test of the main tops at $113.56 and $115.29.

Bearish Scenario

A sustained move under $108.06 will signal the presence of sellers. This could trigger an acceleration into a 50% level at $104.08, followed by a Fibonacci level at $101.43. This is the last major support before the pair of main bottoms at $99.25 and $97.24.