Brent Crude Oil Price Prediction as Inverse H&S Forms

Summary:
• Brent crude oil price has retreated in the past few days as concerns about a recession, falling demand, and rising interest rates remain

Brent crude oil price has retreated in the past few days as concerns about a recession, falling demand, and rising interest rates remain. It dropped to a low of $97.42, which is substantially below the year-to-date high of over $135. The West Texas Intermediate (WTI) is trading at $93.32, which is slightly above this month’s low of $92.52.

Demand and supply dynamics

Brent crude oil price has recently pulled back as investors react to the meeting between Joe Biden and Prince Mohammed bin Salman of Saudi Arabia. The crown prince reiterated that the kingdom’s supply will be in line with the decisions by OPEC+. 

At the same time, there are concerns about Saudi Arabia’s capacity to boost production. The country is exporting about 10.5 million barrels per day, which is lower than its capacity of over $12 million. But analysts believe that it is almost impossible to increase production to that capacity level. 

Crude oil price has also retreated as investors focus on the tightening by key central banks. Last week, the European Central Bank (ECB) hiked rates for the first time in more than ten years. And the Fed is expected to increase by another 0.75% this week. Analysts believe that these hikes will lead to a risk of a recession. 

Another concern is demand destruction. With oil prices rising globally, there are concerns that more people will continue pausing their travels. Still, there are little signs that this is happening as people continue travelling at a record pace.

Brent crude oil price prediction

The four-hour chart shows that Brent declined sharply in the past few weeks. A closer look shows that oil has formed an inverted head and shoulders pattern, which is usually a bullish sign. It has moved below the descending trendline that is shown in black. The price has declined below the 25-day and 50-day moving averages.

Therefore, there is a likelihood that the price will resume a bullish trend since the inverted H&S pattern is usually a bullish sign. If this happens, the next key resistance to watch will be at $105. A drop below the support at $95 will invalidate the bullish view.