Brent Crude Oil Futures (NYMEX: BB) have plummeted 15% from April’s peak as the market grew increasingly worried about the potential of a recession.
The U.S. economy has shown signs of weakness in the past few weeks as the labour market and manufacturing activity cooled. Traders feared that a recession could be on the horizon, with the outlook shifting towards the likelihood of weakening crude oil demand. Recessionary fears were further compounded by China’s weaker-than-expected economic rebound from its reopening.
However, the Brent Crude Oil Futures were supported by the upcoming Crude Oil Output cut by OPEC+, which will take effect in the second half of the year. Will the output cut be enough to offset losses from recessionary fears?
Bearish traders have heavily subdued the Brent Crude Oil Futures. The price entered into a downtrend following a break below the 100-day moving average and floors set in the prior weeks. Support and resistance are now at the $68.19 and $80.29 per barrel (BLL) levels, respectively.
With price trading at the midway point of support and resistance, the market could either move higher or lower depending on the reaction to upcoming economic data, especially from China and the U.S. If economic data points to a bullish U.S. economy, the Brent Crude Oil Futures could move higher, with the $80.29 BLL level set out as a point of interest for bulls. Alternatively, bearish traders could aim for the $68.19 BLL level if economic data points to softness within the two economic giants, U.S. and China.
Traders will have their eyes glued to Retail Sales and Industrial Production, set to be released in both the U.S. and China, along with the U.S. Labour Market reports, which will provide further insight into the current state of the U.S. economy. Should weaknesses in the world’s leading economies be put on view, the Brent Crude Oil Futures could give into bearish pressure driven by recessionary fears. Traders will closely monitor the $68.19 and $80.29 for trading opportunities.
Sources: Reuters, TradingView