The initial response by oil to weak US economic numbers was to ease, a weaker economy in its biggest user means weaker demand at a time when top oil importer China has been reducing its purchase of middle east oil. From the supply side the US Energy Information Administration reported that strategic reserves dropped more than expected by 2.5 million the previous week providing some cushion that lead to a turn around. Coupled with the approach of the US driving season we now view Oil as likely to be in equilibrium, continuing its range play until demand again picks up this summer.
Resistance
- 85.17 – Intraday Lows
- 84.29 – Daily Consolidation Resistance
- 83.34 – Intraday Consolidation Resistance
Support
- 82.28 – Intraday High / Low
- 81.52 – Daily Consolidation Floor / Low
- 80.84 – Wednesday Low
Brent crude shows a failed breakout in the daily charts with a long tail sticking out of the consolidation for the past two weeks. With a very tight body just below the highs and we have a hammer, a potential bullish reversal in the making. At this point our preference will be to look for possible buys on any dip to 82.28 amd 81.52. Again our preference would be to see more hourly tails otherwise a bullish engulfing breakout for an intraday consolidation could also be an entry for us.
