Brent Crude Oil Futures (NYMEX: BB) suffered a 5.35% loss in the last week’s trading after four weeks of gains as fears of a potential recession ahead left traders gloomy about the oil demand outlook.

The U.S. economy provided signals of moderation in recent weeks, with manufacturing activity seemingly taking a slight downturn in the prior month. In contrast, preliminary reports for the current month showed an uptick. The labour market also showed signs of weakness, with unemployment picking up steam above consensus. Questions will be asked as to whether a slight blip in the growth of the biggest economy in the world will turn into a mild recession, weakening the outlook of the Brent Crude Oil Futures from a demand perspective.

Technical

After reaching the highs of the prior month, the Brent Crude Oil Futures plunged from the resistance level at $86.92 per barrel (BLL). Despite bears running riot, the price found support at the 50% Fibonacci Retracement level at the $80.17 BLL level as bulls found their way back into the market.

If bulls now outweigh bears, the Brent Crude Oil Futures could find itself moving higher, with the $86.92 level a probable level of interest for a bull case. Alternatively, if bears look to reinforce their dominance from the prior week, a breakout below the $80.17 BLL level on high volumes could validate a leg down, with the $76.93 support level a likely point of interest in a bear case.

Summary

Traders will likely be focusing on this week’s economic events to determine whether supply, considering the output cut from OPEC+, will be challenged by the demand outlook, which is seeing recession becoming a likelihood. The U.S. will release the PCE Index on Friday, the Fed’s preferred gauge of inflation, while the labour market report and the EIA’s Inventory count will be considered by traders midweek. The $80.17 BLL level will be crucial in defining bullish or bearish sentiment.

Sources: Reuters, TradingView