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Brent Crude Oil, Market Update

7/7/2022 2:43 PM

Current trend

Brent Crude Oil prices are falling to 101.50 amid investors' fears about the global economy going into recession due to the ongoing military conflict in Ukraine and persistently high inflation in developed countries.

For most of 2022, black gold prices rose steadily as investors bet on the rise in the value of the world's most liquid commodity amid soaring inflation, but on Tuesday, the asset was down by 10 dollars or 9% in relative terms. Recession fears have likely caused an outflow of investor capital from oil, which has recently been perceived as the best way to hedge risks. From 1988 to the end of 2020, Brent Crude Oil futures fell more than 10 dollars a barrel on only three occasions, and they have done so twice since March 2022, during which time there have been more than a dozen fluctuations of 5 dollars per barrel. Market volatility has again been seen this week, driven by a drop in investor activity, with open interest on major contracts falling to its lowest level since 2015, indicating a growing number of traders not participating in trading. The market may be subject to strong fluctuations in the future.

Another negative factor for hydrocarbon prices is the discussion by the United States and G7 allies of setting a ceiling price for Russian oil at 40–60 dollars per barrel to reduce energy sales revenues to the Russian Federation's national budget as part of the sanctions policy.

Thus, we can assume that the fall of the trading instrument will continue in the medium term, and the target for sales will be the March low of 98.00.

Support and resistance

The long-term trend in the oil market remains upward. The key support for the trend is at 98.00; after holding it, the growth will continue with the target at the June high. Otherwise, the asset may decline to 91.10 and 86.30.

The medium-term trend is downwards. This week, the target zone 2 (108.93–108.06) was broken, which suggests a further decline in prices towards zone 3 (100.23–99.36). The key resistance of the trend is shifting to 110.16–109.31, from where it is worth considering new short positions.

Resistance levels: 107.75, 119.10, 125.65.

Support levels: 101.50, 98.00, 91.10.

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