- Oil prices stabilize after establishing a new range
- Hurricane season may have a greater influence amid a tight market
- Head and shoulder neckline remains intact
Oil prices appear to be stabilizing around the middle of their new higher range, in the aftermath of OPEC+ cuts (voluntary Russia and Saudi in particular).
Brent crude currently sits a little shy of $85 after rebounding higher off $82 last week and peaking just above $88 earlier this month.
There remains considerable uncertainty around the outlook for the global economy, from China’s sluggish rebound to interest rates and possible recessions elsewhere. But on the supply side, major producers appear committed to ensuring the market remains tight and prices higher.
They had little success earlier in the summer but that is no longer the case and the market is now vulnerable to spikes on the back of surprise outages and hurricane-related issues in the US.
Head and shoulders neckline remains key
The failure to break the neckline of the head and shoulders last week suggests there’s plenty of support for Brent following on from what was a potentially very bullish move just a month ago.
BCOUSD Daily
Source – OANDA on Trading View
The break above the 200/233-day simple moving average band was the first time in almost a year that the price had traded above it. Whether that is now failing or the price is naturally stabilizing having been heavily manipulated on the supply side, only time will tell.
If it had in fact turned bearish, the neckline may have fallen, at which point we could have seen a decent corrective move, based on the size of the pattern. Instead, it’s edging higher and a move above the right shoulder could be seen to weaken or break the pattern altogether.