Brent crude for spot delivery has been flirting with the $70 mark, which being a channel resistance, could push the commodity down towards $60 in the coming days. The move has effectively pushed spot Brent to $60-70 range from $52-63 range in the first quarter.
An IBT UK Technical analysis published on 24 April had highlighted the importance of $70, and the crude oil variety has moved in line with the prediction.
The rise in crude oil to five-month highs on Wednesday (6 May) was mainly fundamental with the US Energy Information Administration's report showing inventories falling unexpectedly in the week to 2 May.
US crude inventories fell by 3.9 million barrels in the week, compared with analysts' expectations of an increase of 1.5 million barrels, sending spot Brent to as high as $69.69, its highest since 5 December, and up from the previous close of $67.56.
The commodity fell to $67.44 by the close but then bounced back above the $68 mark on Thursday. Traders said the selloff near the $70 mark was largely technical, thanks to the channel resistance there as we mentioned earlier.
The correction downward will see $66.0-$65.75 as first support but a stronger one will be $63.0. A break of that will quicken the move back to the channel support which would be just under the $60 mark.
A break of $60 seems unlikely as of now and in case of such a break, the commodity could lose momentum and fall to levels like $55 and $52.