Brent crude under pressure amid concerns over supply expansion

By RoboForex Analytics Department

Brent crude oil prices have recently seen significant selling pressure, falling to $77.21 per barrel on Tuesday. Although there has been a slight recovery from earlier lows, the overall market sentiment remains bearish.

Investors are reacting to recent OPEC data indicating that eight OPEC+ members plan to increase their production by 180,000 barrels per day. This anticipated increase in supply casts a shadow over the oil market, particularly as it coincides with weakening demand indicators in major economies.

A report by the US Department of Energy highlights a drop in oil consumption in June to levels not seen since the summer of 2020, taking into account seasonal adjustments. This drop in demand is reflected in the worrying economic data from China, where factory activity is reported to have reached its lowest level in six months. In addition, the fall in sales prices and the reduction in new orders from Chinese manufacturing sectors add to the pessimism about future demand.

However, part of the support for oil prices is due to production problems in Libya, where the largest local oilfield has halted production due to a state-imposed force majeure situation. This disruption could pose supply problems for major oil consumers and, as highlighted in Raw material analysistemporarily cushion the impact of broader negative trends.

Brent oil technical analysis

The H4 chart shows a previous growth momentum that reached a high at 81.85, followed by a downward correction to 75.20, forming a broad consolidation range at this lower level. There is an expectation of a growth movement towards 79.00 today. If this level is overcome to the upside, it may indicate the continuation of the growth wave up to 82.87. This bullish scenario is tentatively supported by the MACD indicator, whose signal line is below zero but shows signs of an upward trajectory.

On the H1 chart, Brent has formed a corrective structure up to 76.02 and is currently developing a growth structure towards 77.55. A successful break of this level could open the way for further growth up to 79.00, and possibly continue to 82.87. The Stochastic oscillator supports this outlook, with its signal line located around 50 and pointing up, indicating a potential for further price increases.

Overall, while short-term technical indicators suggest a possible recovery in Brent prices, the broader market backdrop remains challenging due to rising supply forecasts and weak demand signals from vital global markets.

Disclaimer

The forecasts contained in this document are based on the author's personal opinion. This analysis cannot be considered as trading advice. RoboForex does not assume any responsibility for trading results based on trading recommendations and reviews contained herein.

This article was written by an unpaid contributor. It does not represent the journalistic work of Benzinga and has not been edited for content or accuracy.