The Brent crude oil price had a strong performance in May as investors watched the unwinding of China’s lockdowns and EU’s decision to place an embargo on Russian oil. As a result, the price jumped from a low of $101 in May to a high of $124.10. It is now trading at $115, which was the lowest level since May 26th of this year. West Texas Intermediate (WTI) is trading at $114.
Demand for crude oil is expected to keep rising in June of this year as China exits its lockdowns, leading to a sharp deterioration of the economy. Therefore, investors expect that demand will keep rising since China is the biggest consumer of oil. At the same time, demand will be helped by Summer’s driving season in western countries.
Meanwhile, supply concerns are likely to continue in June. The most notable development was the decision by the European Union to place an oil embargo on cheap Russian crude oil. This means that the bloc will avoid buying at least two-thirds of the country’s oil. At the same time, they blocked European insurance companies from working with Russian firms. This is a notable thing because of these companies’ substantial market share.
Therefore, with demand rising and supply remaining intact, there is a likelihood that the Brent crude oil price will continue doing well in June. But, on the other hand, there is a possibility that investors have already priced in all these measures in the current pricing.
Brent crude oil price forecast
In my last article, I wrote that oil prices were preparing for a major move. However, the four-hour chart shows that the price of crude oil managed to move above the key resistance level at $114.76 in the month’s final week. This was important since it struggled to move above it starting from April 18th.
A closer look shows that oil has formed a break and retest pattern by moving close to the now-support level. Historically, a break and retest is usually a bullish sign. Therefore, in my view, I suspect that Brent will continue with its bullish trend in June as bulls target the resistance at $130. A drop below the support at $110 will invalidate the bullish view.