BRN bulls made to wait for $90/bbl

Oil prices continue to trade above the $85.00 psychological level, hitting a seven-month high at $87.74 last Thursday. The rise came amid the voluntary supply cuts extensions made by Russia and Saudi Arabia, prompting an OPEC forecast for a potential supply deficit of 2 mln BPD in Q3.

But despite the sharp rise earlier this week, an oil price opened lower at $86.09 on Friday amid a technical pullback, as the 14-day relative strength index (RSI) eases away from the 70 threshold which denotes “overbought” conditions.

The optimistic outlook is built on the assumption that US & China, two major oil consumers, will be able to overcome their economic troubles and continue to grow, thus supporting the demand for oil.

But as China’s July crude imports slid to their lowest in the past sixth month (10.29 mln in July BPD vs 12.67 mln BPD in June) and the persistent concerns surrounding the fate of the US economy, BRN bulls may find it difficult to continue the push towards the $90.00 psychological level.

A potential consolidation may form in the $85.00-$87.00 range. The round number $85.00 level may provide support if the bears try to regain control.