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Brent crude oil has started to test back towards the $70.00 level as traders and investors factor in a coming super cycle in commodities, due to a major uptick in inflationary pressure and improving global growth.
The backdrop for oil price looks good into the next OPEC meeting on June 1st, as the previous OPEC meeting saw key members sticking to plans for a phased easing of oil production restrictions from May to July.
Ongoing problems with COVID-19 in India and Japan are likely to keep oil output restrictions in place. It should be noted that OPEC members actually forecasted an increase in oil demand, even with the spike in COVID-19 cases in key oil importer nations.
OPEC ministers announced that they are scheduled to meet on June 1st to review the output levels for July and August. It is more likely than not that OPEC will keep its output restrictions in place.
With Brent crude on the advance back towards the $70.00 level the current yearly high, just above the $71.00 resistance level is back in focus. The technicals clearly show a clear path to $80.00 if bulls can take out the current 2021 high.
More positive macroeconomic data points from the United States economy and the potential rolling out of a massive new infrastructure spending plan could cause the price of oil to surge further this year.
Market sentiment towards Brent Crude is extremely bullish and is now a very worrying one-way extreme. The ActivTrader Market Sentiment tool shows that some 94 percent of traders are bullish towards further gains in Brent oil. This worrying sentiment extreme could be signalling a major pullback is about to take place.
Brent Crude Oil Short-Term Technical Analysis
According to the four-hour time frame a bullish inverted head and shoulders pattern has been activated and is signalling a coming $4.00 price advance in Brent crude oil.
Bulls need to maintain the price above the $68.00 support level to keep the breakout in place. The $72.00 resistance is the main target for short-term bulls right now.
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Brent Crude Medium-Term Technical Analysis
Looking at the daily time chart, an extremely large head and shoulders pattern with a $10.00 downside potential remains the central focus of medium-term traders.
Worryingly, a move above the $71.00 level would invalidate this bearish price pattern, meaning that the invalidation target for Brent crude oil is $80.00. Watch out for a huge upside move to take place if the pattern is invalidated.
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