As a rule, when you expect an asset to decline, it is an opportune time to purchase it. For example, Brent looked unambiguously bearish against the backdrop of US tariffs. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- Brent bulls have benefited from seasonal factors.
- Crude is growing thanks to sanctions against Iran.
- The S&P 500 rally supports Brent’s quotes.
- Brent can be sold on a rebound from resistance levels of $68.90, $70.40, and $71.00.
Weekly Fundamental Forecast for Brent
No trend is immune to corrections. When chaos and elevated volatility reign in the market, assets face significant pullbacks, as evidenced by the Brent price. The previously indicated target of $58 per barrel was barely touched, and Brent skyrocketed by 17% in just a couple of weeks. In the event of excessive pessimism in the market, bears should prepare for adverse outcomes.
At the core of Brent‘s rally in April was the anticipation of a reduction in US tariffs, sanctions against Iran, and the expectation that global oil demand forecasts might be overly pessimistic. As a result, Brent crude oil prices fell to four-year lows, largely influenced by the International Energy Agency’s (IEA) substantial downward revision of global consumption forecasts for 2026. The IEA now estimates global oil consumption at 730,000 barrels per day (bpd), a reduction of approximately one-third from previous projections. This represents a substantial departure from the 1 million bpd benchmark that guided energy markets for most of the 21st century.
Forecast for Crude Oil Demand
Source: Bloomberg.
It is evident that the IEA’s outlook has been influenced by the US tariffs, which will likely decelerate the global economy and trigger a recession in the US. However, the IMF forecasts US GDP expansion of 1.8% in 2025 and 1.7% in 2026 and estimates a 40% chance of a recession. The decline in oil inventories indicates the onset of the automotive season, and the seasonal factor is expected to support Brent in the medium term.
Furthermore, President Trump’s hesitation to replace Jerome Powell as Federal Reserve Chairman, as well as Treasury Secretary Scott Bessent’s stance on reducing tensions with China, have contributed to a positive outlook for US stock indices. Global risk appetite is increasing, a positive development for Brent.
Crude Price and S&P 500 Index Performance
Source: Bloomberg.
The Brent rally is also propelled by US sanctions against Iran’s LNG producer. Washington has indicated a firm stance toward Tehran, and reports of progress in the nuclear deal have been counterbalanced by news of new restrictive measures. Investors are confident that without an agreement, the US will reduce Iran’s oil exports to zero.
According to Morgan Stanley, the downward trend in Brent prices is expected to persist; however, as summer approaches, the seasonal factor is likely to support it. A collapse is not anticipated before the second half of the year.
At the same time, many disagree with this assessment. New US sanctions on Tehran stem from China’s decision to cease importing American liquefied natural gas (LNG). Washington’s actions will prevent Beijing from acquiring an alternative source of Iranian oil and other commodities. Tariffs will be reduced, but not to the extent that they hinder the global economy and global oil demand. Meanwhile, US stock indices are not showing any signs of recovery.
Weekly Trading Plan for Brent
All the above lead us to the conclusion that the correction will soon reach its peak. Therefore, investors may consider selling Brent on a rebound from resistance levels of $68.90, $70.40, and $71.00 per barrel.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of UKBRENT in real time mode
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