The new week started with a reversal in Brent crude, which has two fundamental backgrounds. The first is a de-escalation of the Russia-Ukraine conflict, and the second is optimism about talks with Iran. Without going into details, let’s look at this from a supply and demand point of view.
So, the ease in Europe means a lower threat for supply, and a bigger supply means a price drop. Iran talks have the same effect, but they don’t lower the threat for supply; they potentially open new sources of supply. The outcome is the same, though; potentially more oil on the market, that’s why the price of oil is currently dropping.
Technical View
The price is still in the channel up formation (blue lines), and actually, the price is bouncing off its lower line as we speak. As long as the price remains inside the channel up formation, there’s no legitimate sell signal here.
The sell signal would be triggered only when the price closes an H4 candle below the lower line of this formation. If that happens, the first target will be $89 (violet), and the second one will be $85.7 (yellow). The second is much more critical from a technical point of view - those were the tops from the end of last year.
To sum up, despite the latest negative switch in fundamentals, buyers are still holding the price in bullish territory. It would be premature to call a sell signal when the price is still in a channel-up formation. We need to see a breakout of the lower blue line first; without that, the bullish trend remains intact.
