Crude Oil Fundamental Backdrop

Brent crude trades marginally lower this morning after minimal headway has been made with regards to the Russian oil ban, stemming from the Hungarian government's reluctance to stop Russian oil flows from its Druzhba pipeline. This may seem insignificant at first but the pipeline in question accounts for roughly 50% of total inflows to the EU which will considerably reduce the impact of an EU ban.

On a more positive note, COVID cases in Shanghai have fallen giving a slight boost to demand-side forecasts.

Later today, the IEA and OPEC are scheduled to release their monthly reports with a focus on supply revisions (if any) in response to the EU’s proposed ban.

The U.S. dollar has been bid this morning across most major pairs thus weighing on any crude oil upside (inverse relationship), leaving prices in limbo ahead of the oil reports and U.S. PPI later today (see calendar below).

Source: DailyFX Economic Calendar
 

Technical Analysis

Brent Crude (LCOc1) Daily Chart

(Click on image to enlarge)

Chart prepared by Warren Venketas, IG

Daily brent crude price action highlights the market's hesitancy around the Russian oil ban after an initial breakout from the symmetrical triangle pattern (black) that was swiftly capped as the hype dissipated. Oil markets are looking for a fundamental catalyst for directional bias either from the Chinese economy or more clarity around the EU’s anticipated oil ban.

The Relative Strength Index (RSI) confirms this indecision with a reading around the 50 level which favors neither bullish nor bearish momentum.

Key resistance levels:

• $109.03
• 20-day EMA (purple)
• 50-day EMA (blue)

Key support levels:

• 100-day EMA (yellow)
• $100.00

IG Client Sentiment: Bullish

IGCS shows retail traders are marginally NET LONG on Crude Oil, with 51% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view of crowd sentiment however, after recent changes in positioning we settle on an upside bias.