Brent Crude – Time for a correction?

Rally lost momentum

Brent crude has been running low on momentum in recent days and may be primed for a corrective move.

The fundamentals have become increasingly bullish for oil prices as the weeks have passed, from a strong economic recovery to a carefully managed return of output from OPEC+ and now, an energy crisis that has increased oil crude demand by 500,000 barrels per day.

A year and a half after oil prices went negative, $100 a barrel is realistically in sight and OPEC+ is doing little to stop it. After a strong surge, prices are starting to see some resistance though after Brent peaked above $86.

The pullback we’ve seen today has brought the price to an interesting support level . As you can see on the 4-hour chart, the bottom of the 55/89-period SMA combines with fib levels and the rising trend line , which could provide support around $83.50.

This would be a very shallow corrective move, but it has been a very powerful rally in recent weeks so that wouldn’t come as a great surprise.

That said, the momentum indicators recently have shown a divergence with price which may suggest a larger correction is on the cards, with $83 the next test but $80-81 being the next major barrier to the downside.

A move below $84 ( ish ) would also represent a break of a double top neckline, which could support a deeper correction before interest potentially appears once more.

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