Brent Crude Oil Technical Analysis - Brent Crude Oil Trading: 2016-02-18

Iran supports oil prices

The Iran’s officials have announced they support the initiative introduced on Tuesday by Russia and Saudi Arabia to freeze oil production volumes. Meanwhile, Iran called the set limitations “illogical”. The plan is to freeze oil production at the level of January 11, 2016. Soon after the news the oil prices rose but closed in a negative as the price for Brent barrel was at $31.5 on January 11 which is below its current prices. Will oil prices continue edging up?

Oil prices were mainly expected to fall on the market participants’ assumption that Iran will increase its oil production volumes by 1mln barrels a day from 2.5 to 3.5mln barrels once the Western sanctions imposed against it are lifted. That is exactly the volume Iran used to produce once. The Iran’s oil minister Bijan Zangeneh welcomed the idea of output freeze but the nation’s envoy in OPEC Mehdi Asali said the level of January 11 is close to the axis and is “illogical” if all the producers want to balance the market. They said that OPEC members have increased output while Iran was unable to follow their steps under sanctions. Brent crude edged up on Wednesday as market participants believe OPEC will freeze the output at the lower level with due consideration to the Iran’s opinion. Meanwhile, the global oil supply glut is now around 1mln barrels but not 1.5 barrels as assumed previously. The US weekly oil stockpiles change is to be released at 17:00 CET on Thursday and are expected to have increased which may limit oil price growth. The further Brent dynamics will depend on the output limits imposed by OPEC and Russia.

On the daily chart Brent: D1 is correcting upwards from its 12-year low having formed the triangle and having verged its upper boundary. The Parabolic and MACD indicators give buy signals. RSI is on the rise and is above 50, no divergence. The Bollinger bands have contracted a lot which means lower volatility. The bullish momentum may develop in case the oil prices surpass the last fractal high, the Bollinger band and the upper triangle boundary at 36. This level may serve the point of entry. The initial risk-limit may be placed below the Parabolic signal, Bollinger band and the last fractal low at 30. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 30 without reaching the order at 36, we recommend cancelling the position: the market sustains internal changes which were not taken into account.