Brent Oil outlook: Hit one month high as situation in the Middle East escalates further

Brent Oil

Brent price rallies for the second consecutive day on intensifying hostilities between the US and Iran that resulted in closure of strategic Strait of Hormuz and fueled fears about prolonged supply disruptions that may send fresh shockwaves towards already weakened western economies.

Oil price hit new highs of over one month on Tuesday and so far does not show signs of fatigue, as worsening geopolitical situation continues fueling bulls.

Technical picture on daily chart has also significantly improved as positive momentum strengthens, the price broke and closed above 200DMA ($78.53) and psychological $80 barrier on Monday, with Tuesday’s extension higher pressuring net pivotal barriers at $88.87 (Fibo38.2% of $119.18/$70.13) and psychological $90.

Formation of 5/200DMA golden cross and 10/20DMA bull-cross reinforces near-term structure, as bulls look for break above $88.87/$90 triggers to open way for further advance and validate reversal pattern.

Partial profit-taking after strong rally cannot be ruled out in coming session and bulls are likely to face increased headwinds on approach to $90 zone, though dips, under current environment, should be shallow and mark positioning for further advance.

Potential corrective actions should be contained above $82.00 zone to provide better levels for re-entering bullish market.

Res: 88.00; 88.87; 90.00; 91.30.
Sup: 85.80; 84.10; 83.70; 82.80.