Oil price forecast: Bull flag breakout confirmed on the Brent chart

The technical structure of the Brent oil market is calling a move higher to fresh four-year highs above the May high of $80.47. At press time, a barrel of oil is changing hands at $79.37.

Daily chart

As can be seen, Brent closed at $69.46 yesterday, confirming a bull flag breakout -  a bullish continuation pattern, meaning the rally from the Feb. 13 low of $61.80 has resumed and prices could rise as high as $96.90.

The long-term moving averages (MAs) - 50-day, 100-day, and 200-day - are rising, indicating the path of least resistance is on the higher side. The 5-month and 10-month MAs are also trending north.

Still, the bull flag breakout target of $96.90 looks far-fetched for now. Moreover, such high prices will likely push up inflation, forcing the major central banks to normalize policy at a quicker pace. That, in turn, could lead to EM crisis, the slowdown in the global economy and drop in demand for crude. As a result, the OPEC and other major producers are unlikely to allow oil prices to rally towards $100.

That said, the technical setup is bullish enough to yield a test of the 100-month MA, currently located $82.63. Acceptance above that level would expose the June 2012 low of $88.52. On the other hand, a daily close below the ascending 10-day MA would abort the bullish view.

The bull breakout on the daily chart looks legitimate. Nevertheless, to be on the safe side, traders may wait for confirmation on a weekly closing basis before adopting a strong bullish bias.