BRENT CRUDE OIL FUNDAMENTAL BACKDROP
Brent crude oil has already seen some significant price action this Monday after OPEC+ met and concluded that production will remain at prior output levels. The decision came in the midst of other fundamental factors including China’s easing of COVID restrictions as well as the EU’s price cap on Russian oil. G7 nations settled on a $60 per barrel figure on seaborne Russian oil and countries who wish to purchase above this threshold can do so without the Western services such as insurance and transport. Russia in turn stated that they would not be accepting of the price cap which could bring into question future supply that may boost the price of crude oil worldwide.
CFTC BRENT CRUDE OIL POSITIONING:
CFTC data shown above reveals another decline in long positioning for Brent crude oil but the prospect of supply cuts from Russia has propped up crude oil prices. From a dollar perspective, last week’s better than expected Non-Farm Payrolls (NFP) data has not translated through to this week with the greenback trading marginally weaker as focus shifts to U.S. ISM services PMI numbers (see economic calendar below). Services statistics carries more weight over manufacturing in the U.S. as the economy is more reliant on the services industry.
BRENT CRUDE (LCOc1) DAILY CHART -UNDATED
Chart prepared by Warren Venketas, IG
Daily Brent crude price action reveals a long upper wick at present but the rest of the day will confirm whether this candlestick persists which will bring into consideration the 85.00 support handle. Fundamentally, supply concerns could be pointing to higher prices but markets will remain wary until there is further clarity around Russia’s reaction function.
Key resistance levels:
Key support levels:
IG CLIENT SENTIMENT: MIXED
IGCS shows retail traders are NET LONG on crude oil, with 73% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment but due to recent changes in long and short positioning we arrive at a short-term cautious bias.