Brent Oil Eyes Further Gains as Market Sentiment Shifts

Fundamental Analysis and Market Sentiment

As we approach Friday, August 23, 2024, Brent crude oil is poised for a potentially volatile trading day. Following a period of downward pressure driven by oversupply concerns and speculative selling, the market is showing signs of a potential rebound. Key factors contributing to this shift include continued production cuts by OPEC+ and expectations for a tighter global supply. These developments are creating a more favorable environment for oil prices, which may begin to recover as market sentiment improves.

The broader macroeconomic environment also supports this view, as investors anticipate potential adjustments in supply-demand dynamics that could lift prices. However, the upcoming speech by Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium looms large, as any indications of future U.S. monetary policy could have significant implications for the U.S. dollar and, by extension, oil prices.

Technical Analysis and Oscillators Confirmation

Brent crude oil has staged a strong recovery from its recent lows near $75 per barrel, with the price breaking above yesterday’s high at $77.085 and pushing through the immediate resistance at $77.237. This upward move has positioned the price above both the 34 and 100-period moving averages on the hourly chart, reinforcing the bullish outlook.

Oscillators Confirmation

• RSI: The Relative Strength Index (RSI) is approaching the overbought territory, which could signal a temporary pullback as buyers take profits. However, as long as RSI remains above 50, the bullish momentum is likely to persist.
• MACD: The Moving Average Convergence Divergence (MACD) is currently bullish, with the MACD line crossing above the signal line, confirming the positive momentum. The histogram is also showing increasing bullish strength.
• Moving Averages: The price has successfully crossed above both the 34 and 100-period moving averages, providing additional support to the bullish trend. The moving averages are beginning to align positively, further indicating upward momentum.

If the bullish momentum continues, Brent crude could target the next resistance levels at 77.512, 77.776, and potentially 78.203. A break above these levels would confirm the continuation of the current uptrend.

Alternative Scenario

However, the proximity of the RSI to the overbought zone suggests that a short-term pullback is possible. In this scenario, the initial support at 77.085 could be tested. Should selling pressure intensify, further declines could find support at 76.821 and 76.394. A break below 76.394 would signal a potential trend reversal, shifting the outlook to bearish.

Key Levels

Resistance Levels:

• Resistance 3: 78.203
• Resistance 2: 77.776
• Resistance 1: 77.512

Current Price (at the time of analysis): 77.292

Support Levels:

• Support 1: 77.085
• Support 2: 76.821
• Support 3: 76.394

Key Events to Watch

Key events impacting the oil market on Friday and into the following week include the ongoing impact of OPEC+ production cuts and speculative activity in the market. Additionally, Jerome Powell’s anticipated speech at the Jackson Hole Symposium will be closely watched, as any hints regarding U.S. monetary policy could influence the U.S. dollar and, subsequently, oil prices.

Conclusion

Brent crude oil is showing signs of a bullish recovery as market sentiment shifts amid ongoing supply cuts and speculative activity. The technical outlook is supported by bullish signals from the RSI, MACD, and moving averages, suggesting further gains could be on the horizon. However, traders should remain cautious of potential pullbacks, particularly if the RSI enters overbought territory. The upcoming Jackson Hole Symposium will be a critical event to watch, as it could have significant implications for oil prices in the short term.