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Weekly Markets Diary - Commodities

Brent Crude - Weekly

1W chart for oil (Source: OvalX)
Historical performance does not guarantee future profits

The weekly chart on Brent crude shows how price action understandably collapsed in early 2020 on the back of fears the pandemic could cripple the global economy. Fortunately, the worst fears over the pandemic were not realised and prices have since powered higher, moving up to pre-pandemic levels.

However, it is also clear there has been a well-defined trend lower in recent weeks, which can be seen in more detail in the daily chart.

Brent Crude - Daily

1D chart for Brent Crude(Source: OvalX)
Historical performance does not guarantee future profits

The major question now is whether this move lower in 2022 is simply a retracement of these strong gains from the pandemic lows or a full reversal to the pandemic lows?

For price action to fall much further it would be fair to assume the market would need to price in a global economic collapse to the scale envisaged during peak fears over the pandemic. While it is clear the global economy is increasingly under great pressure, the consensus is far from these low expectations. This appears to put a floor on how much further Brent can fall from here without significantly worsening expectations.

Price action in recent days has managed to recover a little, but so far has only managed a move to the upper end of the well-established negative trends. This means more work is needed to feel more confident. But even though near-term moves back towards $75-80 cannot be ruled out, the long-term consensus remains positive on the outlook for Brent. Current nervousness is also creating interesting levels for the longer-term, more patient investors.

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Please note that the presented content refers to the Oval group which contains two legal entities: Monecor (London) Limited authorised and regulated by the UK Financial Conduct Authority (FCA) with Financial Services register number 124721. Monecor (Europe) Limited authorised and licensed under the Cyprus Securities and Exchange Commission (‘CySEC’) with license number 096/08.