Letup in Geopolitics Weighs on Brent

BRENT CRUDE OIL (LCOc1) TALKING POINTS

• Geopolitical tensions lessen for now.
• Dollar comeback limiting brent crude.
• Possible rising wedge break suggestive of further price drop?

BRENT CRUDE OIL FUNDAMENTAL BACKDROP

Brent crude oil prices are trading relatively flat this morning as the rumors around Russian missiles striking Poland is quickly dissipating. The consequence of such actions would have severely disrupted the supply-side should NATO nations have retaliated. On the contrary, Russian supply to Poland as stated by Transneft could be on the cards in future which goes against prior remarks by the Polish government to halt oil imports from Russia by the end of 2022.

Despite yesterdays fall in crude inventories as released by the EIA weekly storage report, brent crude reacted minimally mostly due to a stronger U.S. dollar. Later today, the economic calendar (see below) includes building permit data as well as a few Fed speakers. The greenback has been on a corrective decline of recent due to easing inflation and moderated future interest rate hikes. Taking this into account, the Dollar Index (DXY) could be bottoming out as fundamental headwinds particularly in Europe and the UK, are resulting in less aggressive central bank outlooks which could stabilize the falling USD.

ECONOMIC CALENDAR

Source: DailyFX economic calendar

TECHNICAL ANALYSIS

BRENT CRUDE (LCOc1) DAILY CHART -UNDATED

Chart prepared by Warren Venketas, IG

Daily brent crude price action is testing the rising wedge chart formation (black) at its lower bound. A daily candle close below this support zone could spark additional downside towards the psychological 90.00 level. This being said, the Relative Strength Index (RSI) remains around the midpoint 50 reading which favors neither bullish nor bearish momentum at this time – reflective of the fundamental environment. This leads me to expect minimal price volatility short-term and should keep brent crude within the 90-95 range.

Key resistance levels:

Key support levels:

IG CLIENT SENTIMENT: BEARISH

IGCS shows retail traders are NET LONG on crude oil, with 78% of traders currently holding short positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment resulting in a short-term downside bias.

Contact and followWarrenon Twitter:@WVenketas