For most of Q2 2023, Brent crude prices have fluctuated between $70/barrel and $80/barrel as volatility subsided. This range bound movement has built up breakout potential for the commodity going into Q3 do technical signals support the bullish bias present in the fundamentals?
Brent Crude Oil Weekly Chart
Source: TradingView, Prepared by Warren Venketas
Looking at the weekly chart above, Brent crude price action has respected the 200-week moving average (blue) throughout Q2 in spite of bears testing the support zone on multiple occasions. A weekly confirmation close below this key area of confluence could prompt a leg lower but with the‘floor’ mentioned in the fundamental forecast, this may be wishful thinking for bears at this point. The broader long-term picture further reiterates the sharp decline in crude oil prices since its peak in March last year, possibly hinting at fading downside momentum.
Oil markets tend to be heavily influenced by fundamentals such as demand and supply. Take a look at our Q3 fundamental forecast via the banner below:
Brent Crude Oil Daily Chart
Source: TradingView, Prepared by Warren Venketas
Focusing in on the short-term daily chart above, the weeks leading up to Q3 have been forming a rectangle pattern (blue). Traders will be looking for a daily break above or below resistance/support. Prices are currently below the 50 and 200-day moving averages respectively, indicative of a bearish disposition although a resistance break should coincide with a push above the 50-day moving average (yellow), opening up subsequent resistance levels.
Key resistance levels:
• $90.00
• $85.00
• 200-day moving average
• $82.38
• Trendline resistance
• $80.00
• Rectangle resistance
• $77.23/ 50-day moving average
Key support levels:
• $75.00
• $71.40
• Rectangle support
• $70.00
• $65.79
Technical Forecast: Bullish Towards $80.00
Upside scenarios include two phases for bulls. The first phase focusses on the long-term trendline support (black) that has yet to be breached since its inception in 2022. If fundamental variables can align (for example a weaker USD, tight supply and higher demand), this resistance zone is likely to be broken. The next phase will be divided from this point as to whether or not the bull run can continue and seek out the elusive 200-day moving average (blue). Fundamental unknowns will dictate whether or not this can be achieved in Q3 or beyond but for Q3 the forecast under current circumstances backs a long call.
