Brent crude oil price appears to be extending its weekly loss as it is down 0.5% on Tuesday. On 10th August, the price retested the $87 resistance level before suffering a 3.6% correction from that level.
The dollar appears to be gaining strength as the DXY gained 0.3% on Tuesday. Previous analysis shows oil prices and the dollar have an inverse correlation. Thus, the dollar gaining strength suggests a potential downtrend in oil prices. Brent oil price currently sits at $84 per barrel.
Crude Oil Price To Suffer Amid Declining Demand In China
The month of August has not been good for China. The second-largest economy in the world is facing a developing real estate crisis and deflation. Thus, it is safe to assume a reduction in demand for crude oil from the world’s largest importer. This may lead to a fall in Brent crude price in the global market.
Crude oil supply may also be affected as Iraq is considering resuming its supply of 500,000 barrels of oil per day through the Ceyhan terminal. Iran also seemed to be producing crude oil at a record pace, as the oil exporter reported production of 2.2 million b/d this month. This increase in supply will likely put further downward pressure on oil prices.
Brent Crude Oil Price May Tank To $81
The price chart for UKOIL shows another rejection from the $86.6 level. In April, the price tested the same level for resistance before experiencing an 18% correction. Thus, there is a strong chance for oil prices to flip bearish due to the recent rejection.
A breakdown below the $83 support level would make Brent crude oil price prediction bearish for me. If that happens, I expect a retest of the 200 MA at $81.26. For the bulls, the price needs to break above the $86.6 resistance level to aim for further upside.
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