Mar Brent futures were seen supported over the last week amid uncertain fundamentals in the context of a still-raging conflict in the Red Sea. The front contract closed at $78.56/bbl on Jan 19 and was seen trading at $78.67/bbl at 11:45GMT on Jan 22.
Prices seem to be supported by the EIA announcing a -2.5mbbls draw for the week to Jan 12, compared to a more minimal draw of -0.3mbbls expected by analysts. CFTC data shows bullish interest continuing from last week’s trend with speculative longs interest rising 5.0% week-on-week and bear positions were reduced by 2% as over 14.2mbbls worth of bulls were added.
From a technical standpoint, indicators are showing neutral territory, although the RSI is trending upwards and was sitting at 56 on Jan 18. This indicates room for further bullish price action this week. With the conflict extending to Pakistan and Iran as well as the US still in conflict with Houthi militants, support for the contract will be found.
There is notable strength at the front of the curve for physical oil, highlighting the strong immediate demand for crude. Notably, weekly assessments of crude saw a major rally amid buying seen across the board in the CFD contracts. We saw the 29-02Feb v Cal Apr CFT rally from $0.86/bbl on Jan 11 to $1.64/bbl on Jan 18.
From a more macro perspective, prices could be seen supported in the context of positive economic data coming out of the US. Notably, nonfarm payroll employment increased by over 200,000 in December and unemployment was steady, at 3.7%. Markets seem more optimistic with participants marking a 42% chance of a Fed cut in March. This will play a crucial role in seeing whether oil prices will continue to be supported by a stronger economic outlook.
We therefore predict prompt Brent prices to print between $79/bbl and $81/bbl this week.
