Brent crude has been testing the $78 level once again as the lingering global supply concerns continue to fuel oil demand this week. The price targets the $80 threshold, trending north for a sixth day in a row. However, the risk of profit-taking is rather high at this stage as the positive drivers have been largely priced in already.
Market participants continue to wonder how much barrels will disappear from the global market as a result of supply cuts in Venezuela and Iran. On the other hand, trade-war fears have been limiting the bullish potential of oil prices as further escalation of the trade conflict between the US and China could derail global growth and oil demand in the longer term.
Technically, a daily close above $78 will open the way to further gains, but traders may opt to take profit at attractive levels ahead of the weekend and drive Brent lower from current monthly highs. The immediate meaningful support comes around $77.40. Baker Hughes data won’t affect the price dynamics much, unless the number of oil rigs drops or rises dramatically.
By Helen Rush
Senior Analyst at Capital Markets