The Brent crude ended last month 7% higher and continues its Northward journey to start the week. On Monday, oil jumped nearly 2%, settled at $56.20. The structure remains bullish as higher low, and higher high patterns continue to pump the price higher.
The brand-new month marked the start of Saudi Arabia’s one mib/d production cut. In early January, Saudi surprised the oil market with a cut of 1 million barrels per day of crude production starting February. This surprise move led the Brent oil prices rallied to beyond the $50 mark for the 1st time since February 2020. This Monday marked the beginning of the production cut, which means tither supply.
With the vaccine rolling out, IMF raised the global economic outlook to 5.5% in 2021 and 4.2% in 2022. The 2021 forecast is revised up 0.3 percentage point relative to the previous forecast, reflecting expectations of a vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies, as per the official press release.
Reflecting the projected global recovery, oil prices are expected to rise in 2021, just over 20 percent from the low base for 2020 but will remain well below their average for 2019.
According to the Energy Information Administration, Brent crude oil price averaged $64 per barrel in 2019, $7/b lower than its 2018 average. Another 18% headroom is available from the current price of $56.20.
We recommend a target of $63 based on the A-B-C pattern on the weekly chart.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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