The recent correction in the Brent oil market from the $120 region is due to the extremely overbought condition as seen by the RSI. The RSI is now cooling off from the extremely overbought levels. If the RSI hits the mid-level, it will likely trigger a strong buying opportunity in the Brent crude oil market.
Bottom Line
The lack of supplies, falling inventories and uncertainty regarding the Strait of Hormuz continue to support oil prices. The recent recovery from the support suggests that traders are still buying in on a higher geopolitical risk premium despite some short term corrections. The crude oil market continues to trade in a wide consolidation range between $80 and $120.
The technical structure has been constructive as long as prices are above the main support structures. A break above $120 in the crude oil market will fuel the next surge. But any resolution to the U.S.-Iran conflict will diminish the risk premium and could lead to a temporary pullback.
Read more: Crude Pullback May Be the Calm Before the Next Surge
