The Brent Crude rally since mid-August is now testing the descending trendline at $115/barrel. Breakout above this level would warn that the down-trend is ending. Recovery above $120 would signal a fresh primary advance. Rising crude prices are a negative sign for economic recovery, placing a further damper on consumer spending. Reversal below support at $105, however would signal a decline to $90*.
* Target calculation: 105 – ( 120 – 105 ) = 90
The spread between Brent Crude and Nymex WTI Light Crude remains at $24/barrel. Brent is rallying to test the declining trendline, but retreat to medium-term support at $105 is likely. Resolution of the conflict in Libya should take some of the supply pressure off European refineries, easing Brent prices.
* Target calculation: 105 – ( 120 – 105 ) = 90
We then have to wait and see what Chairman Ben pulls out of his hat at the September 21st FOMC meeting. Further quantitative easing would cause an upward spike in commodity prices, including crude.
Brent crude is stubbornly holding above support at $104/$105 per barrel despite the promise of an early resolution to the conflict in Libya. Even WTI Light crude [lime] recovered slightly after improved manufacturing orders in the US. But the primary trend is down and failure of support at $104 would offer a target of $90 per barrel.
* Target calculation: 105 – ( 120 – 105 ) = 90
