Is Crude Oil a Sleeping Giant?

Brent Oil had tested around $97 around 2 months ago as a consequence of supply cuts by the OPEC countries. Since Oil is a commodity that is used in the industry and the daily lives of people, the increase in the price of Oil directly affects the expenses of people.

When the price of Oil is in an uptrend, it can be hard for economies to deal with inflation thoroughly because there will always be a push from the side of the transportation and petroleum chemical industry. Since every product is transferred from the factory to the stores through conveyance by land, it impacts the price of the products due to the increase in the manufacturing cost.

Personally, I buy Brend Oil ETFs and invest in several commodities though they are not performing great when there is an expactation of global recession.

I have 3 reasons to expect higher price levels in Brent Oil
1- The global risks in production
2- The technical chart
3- The depletion of reserves and possible fight against recession

The Global Risk

Unfortunately, there are high risks in the global world due to wars and political conflicts.

As a result of the negative atmosphere in the world, the production and transfer of commodities can be at risk. As it has always happened in the history of mankind, we may once again face a similar issue.

If the production or the distribution of barrels of oil face a problem, this might give birth to overvaluation of Oil in the markets. Even though nobody would like to see that happening, it is a possible scenario that several economists and politics talk about. As investors, we need to project the future to take positions accordingly.

Technical Chart of Brent Oil

I invested in Brent Oil when it tested the 200-week moving average at the price of $72. Since then, we have seen the revival of Oil and it reached up to $97 in a short time.

Here is the chart of Brent Oil in the 1-month timeframe.

The price range I highlighted is a very strong support and resistance zone that is hard to break. Thus, we may expect the price to go sideways or bounce back from that level before breaking it downwards.

Staying above $90 would open another page in Oil because there is a 20-Month resistance on that price level.

What about the weekly chart?

The weekly chart is pretty straightforward.

The price will face lots of resistance to go lower. Yet, I do not expect any weekly closes below these levels which are respectively $86 and $83 from moving averages.

Remember: The commodities save their "intrinsic value" against inflationary fiat money and the scarcity or demand on them will boost their price in time.

Reserves and Production Cut

I think we are heading towards a global recession which may show its face within 2 quarters as the steps taken this year will be visible in the first half of 2024.

In the case that a recession in world trade becomes a phenomenon, the OPEC will rethink the current supply rate and the decision of a supply cut would not be very surprising.

WiseVoter

The world still consumes a lot of oil and the risk of a severe recession is the only negative narrative that can affect the prices.

The psychological level of $100 might be strong resistance for today's conditions but the "black gold" may surprise us if the investors do not start to take positions according to a global recession.

What do you expect in the price of Oil shortly?
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Posted Using InLeo Alpha