FxWirePro: Brent likely to correct towards $58 per barrel area

Brent is likely to undergo a correction, which could prompt a decline in the global oil benchmark towards $58 per barrel. Despite OPEC and N-OPEC members agreeing to an extension of the production cut agreement until the end of 2018, Brent has so far failed to move decisively higher. In addition to that, reports on global drawdown on inventories have also failed to provide the necessary boost. Moreover, an oil pipeline shutdown in the North Sea pushed priced higher but temporarily.

The price action shows that Brent has been trading in a tight range of $4 over the past week or so and if you exclude the North Sea spike earlier this week, the range is even tighter; $3.3 per barrel. In addition to that, Relative Strength Index (RSI), one of the most popular oscillators is clearly hovering in the oversold region.

All of these above strongly suggests that Brent is likely to undergo a correction to the very least and our calculations suggest a drop towards $58 area.

Trade idea:

Sell Brent targeting $58 area at the current price of $63.5 and with a stop loss of $66 per barrel.