Brent: the price is under pressure from excess supply on 02.07.2015

July 2, 2015

Current trend

The uncertainty around Greece, the USD growth and world supply increase keep maintaining pressure on the price of oil. Yesterday’s data on oil reserves in the US surprisingly showed an increase by 2.386 million barrels instead of anticipated 2.075 million barrels reduction. The level of reserves now is much higher than the last 5 years average value.

Iranian oil is likely to join the world supply if the negotiations on Iran nuclear program end successfully on 7 July. Furthermore, according to Citi Futures analysts, the total oil output by OPEC countries could have increased by 6% to 32.1 million barrels a day.

Nevertheless, the markets attention remains on the US Non-farm Payrolls data that is due today. Should the actual figure match positive forecasts, the USD would strengthen. After that a small correction and a flat until Tuesday’s Greek referendum is likely.

Support and resistance

The price has been moving along the upward correction channel from year’s lows of 46.00 and since April is trading in the range between 61.00 and 67.00.

On the daily chart, the growth remains restricted by resistance levels of 69.00 (EMA200) and 65.50 (EMA144). The price broke down the support level at 62.80 (23.6% Fibonacci) and is moving along the downward channel (green color) towards 60.80 (June lows) and, if the trend continues, towards 58.00.

On the 4-hour and daily charts, OsMA and Stochastic remain in the sell zone.

Support levels: 61.00, 60.80, 60.00, 58.00.

Resistance levels: 62.80, 63.90, 64.80, 65.50.

Trading tips

Open short positions from the levels of 62.80, 62.40 with targets at 61.00, 60.80, 60.00, 58.00 and stop-loss at 64.10.

Long positions can be opened after the breakout of 65.50 (EMA144 on the daily chart) with targets at 67.00, 69.00, 72.70 (38.2% Fibonacci).

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