Brent Crude Oil Price is in Consolidation – Here’re the Levels to Watch
Crude oil price is under pressure today as the overall rally of the financial market cools down. Brent crude is down by more than 0.65% and is trading at $42.60 while West Texas Intermediate (WTI) is down by 0.75% and is trading at $40.30. Other commodities are mixed, with gold and silver price up by 0.35% and 0.45%, respectively. Copper and natural gas are down by 0.50% and 0.10%.
There are several factors affecting the price of crude oil. First, the rising number of Covid-19 cases in some European countries has led to many traders to reduce their demand forecast for the year. Indeed, this month, reports from the International Energy Agency (IEA) and Energy Information Administration (EIA) reduced their forecast for the year.
Second, crude oil price is being affected by the uncertainties about supply. Almost two weeks ago, rebels in Libya agreed to lift their conflicts, which will see the total amount of crude oil being exported rising by more than 500K barrels. Media reports have also suggested that Iraq has started increasing its daily production. Meanwhile, Saudi Arabia has also slashed prices for some of its deliveries.
Third, there are risks of trade conflicts, especially if Trump wins the upcoming election. According to Bloomberg, China has started slowing its purchases of US goods. That, together with the fact that the country has created an entity list, means that the conflict could continue to rise. Such conflict is not supportive of crude oil prices.
Crude oil price (Brent) technical outlook
The daily chart below shows that Brent crude oil price has been wavering in recent weeks. The price managed to move below the rising wedge pattern on September 2 and reached a low of $39.40. Since then, it has been moving in a sideways direction slightly below the 50% Fibonacci retracement level.
Also, the volatility, as measured by the Average True Range (ATR) pattern has fallen to the lowest level in months. Therefore, while I suspect the price will remain in this range today, I see it breaking out to either $50 per barrel or to $35 per barrel in the near term.