The oil market is facing significant pressure, with the price of Brent crude plummeting to $71.80 per barrel by Tuesday. This decline erased all the gains made earlier in the week, fueled by concerns over slowing demand in China. The world’s largest raw material consumer is experiencing sluggish economic growth and a global shift towards low-carbon energy sources, both of which are reducing its need for oil. This, in turn, is impacting Chinese oil imports and dragging down global prices.
Adding to the downward pressure, investors anticipate a decline in oil consumption in Europe and the US after the peak summer driving season. Furthermore, some oil refineries are entering maintenance periods, reducing their demand for raw materials. While OPEC+ recently postponed a planned increase in oil output, the potential for an oversupply in the market continues to loom large.
Meanwhile, a storm named Francine is intensifying near Texas, US, and could potentially become a Category 2 hurricane. The impending threat has led to the possible shutdown of some production facilities in Texas until weather conditions improve.
Technical Analysis of Brent Crude
The BRENT H4 chart shows a break below the $74.96 level, completing a downward wave that reached $70.50. Today’s trading is expected to see a consolidation range form around these lows. An upward breakout from this range could signal a potential rise towards $75.00, testing the level from below. Conversely, a downward breakout could extend the range towards the local target of $69.69. This scenario is technically supported by the MACD indicator, with its signal line currently below the zero level and poised for growth.
The BRENT H1 chart reveals that the market has reached the local target of $70.50 for the downward wave. Today, a consolidation range is forming above this level, extending from $71.90 to $70.46. A breakout above $71.90 could trigger a corrective wave towards $75.00. On the other hand, a break below $70.46 could lead to a continued downward trend, extending the wave towards $69.69. The Stochastic oscillator, with its signal line below 20 and showing signs of growth, provides technical support for this scenario.
The overall outlook for oil prices remains uncertain, with conflicting factors at play. The impact of slowing demand in China, combined with the potential for further supply disruptions due to storms and refinery maintenance, will continue to influence market dynamics in the coming weeks.
