Dovish Fed set to help BRN end 7-week losing streak

Oil prices have rebounded above the $77/bbl after reaching 5-month low ($72.53/bbl) earlier this week.

Earlier this week, the Fed issued the strongest hints yet that it’s ready to cut interest rates in 2024.

With the Fed leaning into market bets for lower US interest rates next year, that weakened the US dollar while triggering this rebound in oil prices.

The recent IEA’s positive revision of it’s oil demand outlook for 2024 along with a larger-than-expected drop in US crude stock pile has further enabled the BRN bulls to regain control and move above $77.00/bbl line.

However, it might be too early to celebrate...  

• The demand side pressures are still there as China – world’s largest oil consumer is going through the economic turbulence
   
• The recent OPEC+ supply cuts extensions in to 2024 are voluntary in nature, thus leaving a possibility of for some members to disregard the newly assigned quotas
   
• The comeback of the US oil production, hitting new records at 13.2M bbl/day

In other words, if the global economic outlook continues to sour, persistent demand-side woes as well as still-elevated non-OPEC supplies threaten to cap Brent’s upside. OPEC+ members need to overcome the internal rift and trigger concerted supply cuts in order to give Brent bulls a major shot in the arm.

From the technical perspective…

• To the downside the psychological $77/bbl may prove to be a strong support level
   
• To the upside the 21-period SMA sitting at 78.575 may prove be a strong resistance
   
• RSI is located at 44.34 (<30 – oversold; >70 overbought), underlining the current market’s state of uncertainty