Current trend

Amid heightened geopolitical tensions in the Middle East, Brent Crude Oil prices have been growing for the second session, testing 71.93.

Israel launched an airstrike on the port of Hodeida in Yemen over the weekend, sharply expanding its offensive against the Iranian-backed Islamist militant group Hezbollah just two days after the assassination of its leader, Hassan Nasrallah, in Lebanon. The Israel Defense Forces said Sunday’s attack involved dozens of fighter jets, targeting power plants, ports, and other infrastructure. Such active actions cause concerns among oil producers and refiners in the region, and investors are increasing concerns about the stability of oil supplies from the area. As a result, the asset added 2.75%, reaching 72.85 compared to the low of 70.90 last week.

The positive dynamics may be temporary since the main problem for the markets is the excess supply. Despite active measures to stimulate the economy in China, adopted last week, recently published indicators of economic activity are declining. Thus, the September Caixin manufacturing PMI was at 49.3 points, below the forecast of 50.5 points and the previous value of 50.4 points. The service PMI was 50.3 points against expectations of 51.6 points and 51.6 points previously, which led to a decrease in demand for energy resources. Meanwhile, the measures to support the economy will have a delayed effect. In addition, the quotes are negatively affected by the expectation of the lifting of production restrictions by OPEC countries on December 1, which may ultimately lead to additional oil supplies to the market and act as a catalyst for renewing the September low of 69.10.

Support and resistance

The trading instrument is moving in a long-term downward trend. In September, it tested the support level of 70.00 and began a correction, within which it reached the resistance level of 75.80 and returned to decline last week. After a breakdown of 70.00, the price may reach the support level of 66.50.

The medium-term trend reversed upwards last week when the quotes broke the trend resistance area of ​​74.37–73.89 and headed towards zone 2 (79.19–78.71). A correction with the target in the support area of ​​70.24–69.68 is developing. After reaching it, long positions with the target at the high of last week at 75.75 are relevant.

Resistance levels: 73.60, 75.80, 78.15.

Support levels: 70.00, 66.50.

Trading tips

Short positions may be opened from 73.60, with the target at 70.00 and stop loss 74.60. Implementation period: 9–12 days.

Long positions may be opened above 74.60, with the target at 77.50 and stop loss 73.35.