Brent crude oil price analysis: 2 key catalysts have emerged

Brent crude oil started the week in a positive note as concerns about global supplies continued. It jumped to a high of $86.47, the highest point since April 23rd. It has risen by over 20% from the lowest level this year.

Saudi supply cuts

There were two main catalysts for Brent crude oil prices rally. First, Saudi Arabia, the second-biggest oil exporter in the world, announced that it will extend its supply cuts to the end of September. 

Second, crude oil prices jumped after Ukraine conducted some drone attacks on Russian energy assets. As I wrote here, Ukraine bombed a Russian energy port last week. These attacks continued during the weekend when the country bombed a ship in the Kerch Strait.

Ukraine’s attack on Russia’s oil infrastructure is happening after Putin ended the grain supply deal. As such, it is putting pressure on him to resume the deal even as it looks for alternative routes.

Crude oil prices also jumped as hopes for higher demand rose as the world economy recovers. Data published on Friday showed that the Anerican unemployment rate dropped to 3.5% in July as the economy added over 187k jobs. Wages rose by 4.4% during the month.

These numbers showed that the economy is still doing well, which is a good thing for demand. In China, the biggest oil consumer in the world, the government has been implementing a stimulus package to stimulate the economy.

Brent crude oil price forecast

Oil chart by TradingView

The daily chart shows that Brent has made a strong comeback in the past few days. It recently flipped and retested the important support level at $78.36, the highest point on June 6th. Now, oil has retested the crucial level at $87.10, where it failed to move above since January.

Oil has jumped above the 25-day and 50-day moving averages while the Stochastic oscillator has jumped above the overbought level. Therefore, the outlook for Brent is bullish, with the next level to watch being at $90. 

The alternative scenario is where crude oil price retreats and retests the support at $78.36.