Brent Oil Price Analysis September 2020: Brent to Fall on Demand Drop?

by birtanpublished on October 2, 2020

The recovery in crude oil looks to have stalled over the last few days or so we've had this tight trading range we're looking at brent oil here and we have seen um it get hit quite hard trading back to where it was at the end of july so is the recovery over is it time to go uh short again for oil or actually is this just a great buying opportunity looking for a push back up to the mid 40s here's the chart of brent crude for the year so far uh beginning of the year trading up uh

Around 70 dollars a barrel and of course we all know what happened um since then we've seen the price of all come under pressure we're looking at the cash price of brent oil here you can trade various futures contracts as well but the cash price traded down uh as low as what 19 at the 22nd of april this year since then we've seen we've seen this great recovery let's just take a look at that so we've seen the price push back up but i did say in the last oil video

That even though it kept breaking out to fresh recovery highs we really weren't seeing any momentum and we have seen it roll over in the last week or so sliding from a high of uh above 46.50 at the time recording trading at just above 42 so pretty much a 10 full in the price of oil in a little over a week and i think it's really interesting again although it had gone perhaps a little bit boring recently with that tight range and i'm

Just wondering what the trade is to do next we do have an existing trade on oil let's take a look at that so we've got our usual mix of various trades but right down here at the bottom 24th of august went short uh us crude at uh 42.66 the price is uh 39 and a half at the moment so we're up a couple of hundred pounds well 274 pounds on that we need to i think adjust that trade slightly but in this video about brent uh where's the opportunity i'll talk about it a bit more now what's been

Driving it then we'll come back and look at things in a bit more detail hello i'm david jones from capital.com and i thought we'd do an update on brent crudel you see that we've got a trade running on west texas um the us version so i thought let's take a look at brent for the rest of september i think it's going to be a really interesting month given that volatility has picked up the last few days so as usual in this video talk a bit more about what's going on

With oil then we'll look at the big levels and we'll jump back onto the platform um look at things in more detail and see if we can get another trade on uh for royal um welcome to any new subscribers who joined after we did the live stream on friday the first live stream we've done for about a year over uh the us non-farm payroll so i hope you find our videos uh interesting and useful if you're watching this and you haven't subscribed if you can click on subscribe

And if you click the alarm bell thing as well uh you get a notification off youtube every time we upload a new video or go live but let's get into it let's take a look at brent crude so we had seen a strong recovery uh since the april low for oil prices around the world brent crude and west texas of course famously uh back then in april we saw the may contract for west texas go negative because of uh oversupply lack of demand and problems with storage since then

We've seen the oil price bounce back but i did say last time around in the video it was really struggling whenever it broke out to new recovery highs during august we were really struggling to see any momentum and i was worrying that have we perhaps seen a stall in that recovery and that certainly played out over the last few days we have seen um fairly big falls relatively speaking for the price of all and we saw that in the chart for brent crude so we've seen the oil price under some pressure

There's a few reasons for this we still have ongoing concerns what's the economy going to look like over the short medium uh longer term from here after the corona virus we are still seeing infections flare up in various parts of the world here in the uk of course we had the largest number of new cases over the weekend i think we've got to go back to to the end of may so so three month high for new cases so there is a worry that um you know we don't have this this pandemic under

Control we know the effect that lockdown has had an economy so there are still concerns about what economy is going to look like and what this is going to mean uh in terms of global oil demand on top of that if we look at inventories um clearly the inventory's data gets released uh every week basically how much oil is in storage and on a seasonal basis u.s oil inventories uh at their highest uh in more than a decade you know so we have this concern about demand um high storage uh that that is classic

Uh demand supply and balance potentially that's put the price under pressure but i think from a trading point of view i think it is welcome you know we are seeing a return to volatility in this market and many other markets over the last week or so after what has been fairly tight trading in oil so i do think it makes for a much more interesting market in the days and the weeks to come let's talk about the levels then we'll

Jump back on the charts so the recovery high here for brent crude it's the cash price i'm talking about 46.60 was hit in august then we have an interim height set on the way down 44.70 so i think these are two significant hurdles if you did get a rally for oil from these levels and on the downside i think the next obvious support comes in around 41.70 uh from july but let's put some color on these numbers let's look at things in more detail and see if we can get another trade on

Uh and get something done with brent crude so let's take a look at this recovery in brent i think it is interesting um up here we've seen that this great rally this great recovery like i said the price kept breaking out broke out on at least a couple of occasions but uh couldn't really push any higher we didn't get any follow through and that was really the reason for going short last time around i thought perhaps the risk versus reward uh favored the downside

Um but i'm just wondering looking at it now because it has come so far will we see the price of brent um snap back in the short term so we've got quite good support coming in from what early july around 41 30 and again 4170 july the 30th so we are arguably in an area of good support bigger support out here from late june around 39.60 if we take a look at the rsi um because volatility was relatively low we weren't getting that much in the way of

Major swings in the rsi but with this sell-off we've seen the rsi uh go back into oversold first time we've seen it down here we've got to go back to those um those april lows to see it really down at this extreme so i'm wondering is the opportunity for maybe a shorter term trade for the market going up we still have that existing trade for oil to fall we'll come back to that and tweak that in a second but let's take a look at the hourly chart for this

To figure out what we could do next so here's our hourly chart uh for royal and you can see we are sort of running into this old support level uh running from about 41 and a half that sort of area so i could actually be tempted to be a buyer back here thinking perhaps the sell-off has gone a bit too far in the short term perhaps we'll get a squeeze higher and then turns down again the only question for me is where's where's my stop gonna go

I think one obvious level is the other side of these lows perhaps a more conservative stop here is the other side of uh what 39.60 these lows from the 25th of june and i'm just wondering do i buy in now if i think the price is going to bounce back or do i wait to see if it squeezes a little bit lower so i think i do want my stop the other side of this this 3960 lower so i'm going to go 39 is where my stop is going to go if i'm going to be a buyer the only thing i need to figure out now do i buy now or

Do i wait let's just zoom in and perhaps the last week or so so at the time of recording you'd argue it's still looking pretty weak we've started the week down here so sunday night trade gapped a bit lower to 42 dollars and we're trading at 42.26 it is looking really oversold but of course don't forget this is just an hourly rsi this isn't the uh the daily rsi so we will see much more in terms of of swings of this rsi but what i'm going to do

We're short already um it wouldn't surprise me if we squeezed perhaps a bit lower from here so with that stop at 40 at 39 i am going to place an order to buy basically if we squeeze back to the lows so far for the week i mean it's only monday um but let's put it let's put an order in to buy at 42 with a stop at 39 and then i'm also going to alter that existing trade let's get this order placed first of all so i'm going to buy 110 if the price of

Brent slips to 42 which i don't think is ridiculous at all it's only 25 cents lower 30 cents lower than what it is now if that order gets filled put a stop loss in at 39 dollars a barrel and that's for our normal risk of a our new normal risk of 250 pounds let's just place that limit order and if we take a look at market sentiment here you can see that that 92 percent of people who have a trade on with us are still bullish uh on oil that is a bit of a warning for

Me when everyone is this bullish because markets will often do whatever they can to confound the majority of people so um perhaps i shouldn't be too bullish down here but the orders place so we're buying at 42 with a stop down here at 39 so it does give us i think quite a bit of wiggle room perhaps the more patient trade is to see how it goes over the next couple of days this week but um i thought as we're doing the video now let's get the trade on let's just go and have a look at that and adjust the

Existing trade so the trade added on crude oil uh on u.s crude oil i sold at 42.66 i've still got my original stop in there at 45. i'm going to move that i'm going to move that to 42.50 so i'm going to move the stop down lock in a tiny bit of profit but at least take away the risk of lost here and try and perhaps run this short more medium term compared to the short-term trade i'm doing now so i've moved my what's now a take profit stop to 42.50 on the u.s crude oil so we would need to

Bounce back three dollars from where it is now and i just wonder after the sharp sell-off do we get a bit more backwards and forwards here i think it's only if we start to lose sort of 37 to 39 on brent crew do we have to worry about a deeper sell-off and perhaps if we see these levels broken we start targeting a move back towards 30 dollars a barrel but let's not get ahead of ourselves i think we've come quite a long way relatively speaking in

The last week it wouldn't surprise me if we saw the market snap back from here my order's sitting at 42 do we get a push back up to those highs i really still can't see uh crude at 50 a barrel any time soon given the uncertainty but i do wonder if this sell-off has presented us with something something of a short-term trading opportunity looking for it to bounce back up from here that's it for the update like i say much more interesting market i think in the weeks ahead from here we'll see if it can bounce back up

Uh to those old highs but from me david jones and capital.com that's it for our update on brent good luck with your trading for more trading videos just like this please subscribe to our channel

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