Brent and WTI launched the new week with a bearish price gap, following news on potential de-escalation in the Middle East. Israel has decided to withdraw some of its troops from the southern Gaza Strip, approximately 6 months after the start of military operations. On the other hand, Iran continues to threaten Israel, although there were fears that after the attack on an Iranian diplomatic facility in Damascus, a full-scale war between Israel and Iran might occur. Now Iran is threatening that none of Israel's diplomatic missions are currently safe. However, some media reports also surfaced saying that Iran told United States that it will refrain from retaliating for Damascus strike if Gaza ceasefire is reached.
Brent (OIL) is currently testing the range of the previous correction on the H4 chart, after testing the $89 per barrel level in the morning. It seems that the key support level at the moment is the zone between $87 and $88 per barrel.The 50- and 100-period averages from the H4 interval can be found in the area.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile app
Source: xStation5
Moving onto W1 chart, we can see a potential right shoulder of a large head and shoulders pattern forming. This formation occurs after a downtrend that lasted from June 2022 to June 2023. Therefore, it would be a continuation formation of the downtrend. Since the current levels are not the highest in the last 2-4 years, the strength of this formation may be limited, and achieving the target around $54 per barrel is unlikely, given the current fundamentals.
However, further de-escalation of the situation and attempts to increase production in some economies (US and non-OPEC) may result in deepening today's correction. In that case, the target for the coming months would be around $78-80 per barrel, which is near the neckline of the potential head and shoulders formation. The completion of the entire formation could only occur in the event of the following scenario:
- Removal of all production limits by OPEC+
- Deep global economic recession (although this could force even stronger production cuts)
Source: xStation5
