Current trend

The price of Brent Crude Oil is trading around 72.00, the low for the last year, and may continue to fall amid a slowdown in the Chinese economy and an increase in oil supply.

Thus, the Q2 gross domestic product (GDP) of China amounted to 4.7% YoY, 0.6% lower than before, and the consumer price index in August increased by 0.6% YoY, below the forecast of 0.7% and 0.4% MoM against 0.5%. Thus, investors are concerned about low oil demand from the Chinese economy for the rest of this year, which puts pressure on oil prices.

The second reason for the decline in prices is the OPEC plan to increase production at the end of this year. Initially, the cartel intended to lift the current restrictions and increase the production by 180.0K barrels per day in October. However, in early September, the OPEC group postponed these actions for two months. Sources close to the negotiations emphasized that the main reason was a significant drop in the quotes in recent months. Recall that the production cut of 2.2M barrels per day, introduced by eight OPEC members, was a temporary measure. Markets are considering it in current prices and betting on a decline.

On the other hand, factors supporting the asset include the recent forecast of the storm turning into a hurricane off the coast of the US Gulf of Mexico, where significant oil and natural gas reserves and numerous refineries are located, damage to which could reduce supply on the market.

Another factor that can support prices is the future decision on the US Fed interest rate. Analysts predict the regulator will cut the rate by 25 basis points on September 18, weakening the US dollar and increasing oil prices. Also, monetary easing usually stimulates economic growth, which leads to increased investment in general and in the oil business in particular.

Support and resistance

In the long term, the trading instrument is declining, having broken through the support level of 73.00 last week. Now, it becomes the nearest resistance level and shifts to 73.30, and the sales target is the 2023 low of 70.20, after consolidation below which the December 2021 low of ​​66.50 may be reached.

The medium-term trend remains downward. Last week, the quotes broke through zone 3 (74.51–74.05) and headed towards zone 4 (70.23–69.80). New short positions are relevant on the correction from the key trend resistance area of ​​77.02–76.48, with the target at the current week’s low around ​​71.20.

Resistance levels: 73.30, 76.10, 78.15.

Support levels: 70.20, 66.50, 60.38.

Trading tips

Short positions may be opened at 73.30, with the target at 70.20 and stop loss 74.30. Implementation period: 9–12 days.

Long positions may be opened above 74.30, with the target at 76.10 and stop loss 73.50.