Brent Crude Oil Price Recovery Hits Resistance at the 50% Fib

Summary:
• What is the outlook of the Brent crude oil price as the recovery faces resistance at the 50% Fibonacci retracement level.

Brent crude oil price has made a slow recovery in the past few days as investors focus on the rising demand from China, the biggest consumer. With the country’s recovery in high gear, analysts and OPEC believe that demand will outstrip supplies by far this year. Brent was trading at $86.25 on Monday, much higher than the lowest point in 2022.

Chevron and Exxon earnings

The main catalyst for oil prices is the supply and demand dynamics around the world. On the supply side, recent data shows that OPEC countries like Nigeria are pumping more oil that is close to their set quotas. These countries have achieved that by solving some of the logistics challenges that have existed for a long time.

At the same time, data by Baker Hughes shows that rig counts are still rising internationally. In the US, the number of active rig count remained flat last week to 771. These rig counts are about 161 above where they were in 2022. In Canada, rigs increased by 6 to 247, up by 30 from the same point in 2022. Internationally, there are about 900 active rigs. With oil prices steady, there is a likelihood that rig count will increase.

The other important catalyst for oil price is oil supermajors earnings. Chevron announced strong results last week and boosted its share repurchase program to $75 billion. It also announced plans to boost its dividends. ExxonMobil, the biggest American supermajor, is also expected to announce robust earnings this week.

Brent crude oil price forecast

Brent crude oil has been in a slow bullish trend in the past few weeks. In this period, it has formed an ascending channel that is shown in black. This price is now a few points below the upper side of the channel. It has also moved a few points below the 50% Fibonacci Retracement level.

Oil has also formed a small double-top pattern at $88.70 whose neckline is at $85.62. In technical analysis, this pattern is usually one of the most credible bearish signs. It is also consolidating at the 50-period moving average. Therefore, there is a possibility that crude oil price will have a bearish breakout. If this happens, the key level to watch will be at the psychological level at $80.

On the flip side, a move above the double-top price at $88.70 will invalidate the bearish view and signal that there are still more sellers left.