Since reaching a high of $139 in March 2022, Brent crude has experienced a significant decline, losing half of its value and currently sitting at $70. However, recent price action suggests that the trend may be shifting.
The $70 area had been a strong resistance level for two years until September 2021 when it was decisively overcome. This breakthrough turned the previous resistance into support, enabling oil to skyrocket to its peak of $139.
While oil eventually dropped back to the $70 level, the nature of the decline changed in May and June. Brent crude tested the $70 area three times and held, creating higher lows. In contrast, West Texas crude failed to produce higher lows since March. These divergences often occur at market bottoms.
The latest development saw oil surpass the short-term downtrend by closing above $77 last week. However, to confirm that a bottom has formed, Brent crude needs to breach $80 on a weekly close. This level coincides with the major downtrend line and crossing it would carry significant weight. Additionally, breaking through the 11-week moving average at $80 would further support the bullish case.
In summary, oil’s price action has shown improvement, indicating a potential shift from a declining trend to a bottoming phase. A weekly close above $80 would confirm this reversal and forecast a possible advance towards the $90 range.
