BRN moves below 100-period SMA amid demand concerns

Oil has moved below 100-period SMA (~81.654) following the International Energy Administration’s (IEA) decision to downgrade its oil demand outlook for this year.

The IEA’s forecasted demand now stays at 1.22 million bbl/day, down from the previous estimate of 1.24 million bbl/day.

The decision comes amid the slowdown in the Chinese economy as well as a wider global economic turbulence.

However, OPEC has maintained its demand estimate at 2.25 bbl/day.

An increase in the US crude inventories (8.52M vs 2.6M forecast) and EIA crude oil stocks (12.0M vs 2.6M forecast) underscore a potential oversupply which may translate in to BRN moving further downward.

The unclear situation regarding the future of interest rates in the US is also affecting the oil markets.

Lowering interest rates could translate into oil moving higher while keeping the rates higher for a longer could put downward pressure on the black gold.

From the technical perspective …

• 100-period SMA (~81.656) is set to provide immediate support. Moving below it might drag the price further down towards the $80 psychological level
   
• 21-period SMA may also extend support if the BRN bears try to regain the initiative
   
• To the upside the $83 resistance level may be the next prime target for the black gold’s bulls
   
• The Relative Strength Index’s (RSI) position at 55.42 underscores the current state of uncertainty in the market, leaving the possibility for the BRN to move in either direction depending on the upcoming macro-economic data