Brent crude futures on the Intercontinental Exchange (ICE) had hit a low of $16 during the price crash that happened between January and April 2020. But since then, it has been on an uptrend. Although there was a moderation in price in November 2021, when it fell from $86 to $70, the futures rebounded quickly. The resistance of $86 is critical because it has been stopping the bulls for several years. Nevertheless, Brent futures surpassed $86 in early January this year and rallied to hit a multi-year high of $105.8 last week. But the price softened since $105 is a considerable resistance and closed at $97.9 on Friday.
Going ahead, the inverted hammer candlestick pattern, formed last Thursday, hints at a possible correction. The nearest support is between the price band of $86-90 and until the price holds above this level, the short-term trend will be bullish. A breach of this can turn the short-term trend negative and drag the price to $77 in a year. Subsequent support is at $70. The medium and long-term trend will remain positive so long as the price trades above $70. On the other hand, if the uptrend resumes and the futures breach $105, it can swiftly rally to $120 in the next two to three months. Thereafter, the price could gradually decline towards the support band of $86-90 before the end of the year. A breakout of $120 looks less likely in the next couple of years.
WTI crude
West Texas Intermediate (WTI) crude futures on the Chicago Mercantile Exchange (CME) charted negative territory for the first time in history on April 20, 2020, declining to as low as -$40.3. However, the futures recovered immediately and established an uptrend. Last week it moved past the resistance at $85 and hit a fresh multi-year high of $100.5. But it gave up some of the gains and ended the week at $91.6. Short and medium-term trends will be positive until the price stays above $85 and $76, respectively. A break below $84 can weaken the bulls and the price could drop to $76. Below this level, the support is at $66. If the bulls regain traction and lift the contract above $100, there may be a quick rally to $115 from where the possibility of a decline is high. Breach of $115 is a low probability event.