Oil heads toward $85/bbl on Increasing Odds of US Rate Cuts

Oil bulls are pushing the BRN upwards towards $85/bbl after the higher-than-expected U.S. initial jobless claims report, which could contribute to the highly anticipated interest rate cuts by the Fed.
 

Support to the BRN has also been extended by the rise in crude oil imports in China, which rose 5.45% y/y in April 2024, along with a stronger Chinese trade balance ($72.4 billion - actual vs. $58.6 billion - previous).
 

Lower interest rates can lead to lower borrowing costs, which can increase economic activity and thus potentially boost crude oil prices.
 

The geopolitical factor is still very much in play. Any negative developments, especially with a direct threat to disrupt logistical routes in the Middle Eastern region, can significantly affect oil prices.

From a technical perspective ...

• The current price of Brent is trading above its 100-period simple moving average (SMA), underscoring a bullish long-term trend. However, the 50- and 21-period SMAs are still above it, indicating a bearish sentiment in the short and medium term
   
• The shorter 21-period SMA has also crossed below the longer 50-period SMA, further confirming the ongoing downward pressure
   
• The Relative Strength Index (RSI) is floating in neutral territory at ~42 (<30 - oversold, >70 - overbought)
   
• On the upside, $85/bbl may be the key resistance/target for the BRN bulls, while on the downside, the 100-period SMA (~82.8) may provide immediate support