Commodities Watchlist: Brent Crude Dropped To A Support Zone. Will We See A Bounce?

Brent crude oil just dropped back to a key area of ​​interest!

Unless you were busy speculating on Johnny Depp’s future movies, you should know the Financial Times (FT) recently cited industry and diplomatic sources saying that Saudi Arabia is prepared to raise its oil production should Russia’s oil output too fall as a result of its war on Ukraine.

The report came after the EU struck a deal with the UK to ban insurance on ships carrying Russian oil.

Unless they find other insurance providers, ships carrying Russian oil would be turned away from global ports and excluded from a large part of the maritime export market. Yipes!

Brent Crude Oil 4-hour Chart

If the cost of Russia’s eventually sanctions leads to less Russian oil production, then the crude oil market could tighten further.

FT shared that while Saudi Arabia believes that “there are not yet genuine shortages,” it’s also “not in their interests to lose control of oil prices.”

Talks of Saudi Arabia possibly making up for any decrease in Russian oil production helped drag crude oil prices that were already hit by overall risk aversion in the markets.

Brent crude oil slipped (heh) from $124 all the way to the $113.00 area.

As you can see, $113.00 marks a key resistance that held in April and May. Not only that, but it’s also a hair’s breadth away from the 4-hour chart’s 100 SMA and the 61.8% Fibonacci retracement of last week’s upswing.

How low can oil go?

OPEC and non-OPEC oil producers are meeting today and, word around is that they might stick to their output increase schedule BUT exempt Russia from the deal.

A Russian exemption would put cracks on the group’s deal and pave the way for other members to for production increases. Increased supply from other countries would then allow the US and its allies to impose heavier sanctions on Russia without worrying much about its impact on oil prices.

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