Brent crude prices declined for the third consecutive session on Thursday to trade at $86.34 per barrel, having gone down by 1.19%. That was a follow up to 2.9% loss on Wednesday, with the commodity now down by 1% in the last week. The current downward trajectory is driven by concerns over demand after US inventory spiked and key industries in China showed a slowdown.
The US reported a rise in its crude oil inventories for the fourth consecutive week, signaling a strong decline in the demand. The stocks rose by 2.735 million barrels, higher than the forecast 1.600 million. However, that was a significant decline from the previous week’s figure which stood at 5.841 million. The demand side pressures in the last week had been offset by supply-side concerns as tensions rose following Iran’s attack on Israel.
However, the war rhetoric seems to have cooled down after Iran stated that it didn’t intend to conduct more attacks against Israel. Furthermore, many analysts believe that Israel is unlikely to retaliate since the attacks did not inflict substantial damage as 99% of Iran’s projectiles were shot down. This has settled supply-side concerns, exerting pressure on oil prices as demand declines.
Brent Crude prices have risen fast in 2024 and already touched the $90 per barrel mark forecast by Goldman Sachs as its peak, after considering the global economic environment. Furthermore, the price ceiling is inclusive of a geopolitical risk premium of $5-$10 per barrel, and the bank expects Brent to swing in the range of $70-$90 per barrel throughout the year. Dollar-denominated crude oil is also likely to continue easing as the US dollar remains strong, thus reducing demand. The DXY index stood at 105.887 at the time of writing.
Technical analysis
The momentum on Brent crude price favours the sellers, as signaled by the RSI indicator. The commodity pivots at 87.56, and the downside will prevail as long as resistance remains at that level. With the sellers in control, they could break the support at 86.06, enabling them to target 85.16 in extension. However, a move above 87.56 will give the buyers control, but they will encounter resistance at 88.74. A continuation of the control at that point will break the resistance, building the momentum to potentially test 90.02 in extension.