Oil Bounces, but Traders Vanish: Is Brent Heading to a 28% Crash?

by

<a href="https://pricpr.com/brent">Oil</a> Price Bounced From a War Low but 30% of Traders Already Left

Brent crude oil is currently trading around $94.92. Its price is showing a concerning pattern called an inverted cup-and-handle, which suggests a potential 28.8% drop from its highest price in March.

While the recent price increase appears positive, there are underlying signs it might not last. Trading volume is going down, fewer contracts are being traded, and options buyers seem to be purchasing call options not because they’re optimistic, but to protect themselves against potential losses.

An Inverted Cup and Handle Forms as Volume and Open Interest Collapse

The price of oil has been falling since reaching its highest point in mid-March. A specific chart pattern, called an inverted cup-and-handle, formed between early and late March, suggesting the price is likely to continue decreasing.

The price has fallen 28.8% from its highest point to its current level, and this could indicate further declines if it falls below that point. However, after reaching a low of around $90.29, the price of Brent crude oil has rebounded, forming an upward trend – this trend is now acting as the ‘handle’ of a larger chart pattern.

Despite the recent price increase, it doesn’t seem very strong. Trading volume has been consistently decreasing as the price has moved sideways. The latest trading session only saw 6,880 contracts traded, which is significantly lower than the activity seen when the price was initially rising.

Open interest, which represents the total value of all current oil futures contracts, provides a clearer picture of what’s happening in the market. It reached a high of over 700,000 during the price increase in March, but has since fallen by about 30% to 491,810. This indicates that traders are reducing their investments in oil futures.

Want more insights like this? Sign up for Editor Harsh Notariya’s Daily Newsletter here.

The decrease in trading volume and open interest clearly show that this recent price increase isn’t backed by strong buying. Instead, large investors are actually selling off their positions, not adding to them.

BNO Options Show Conflict Insurance, Not Bullish Positioning

Looking at options trading for the United States Brent Oil Fund (BNO), which follows Brent crude oil futures, reveals some interesting trends. On April 15th, the ratio of put options to call options was 0.13, and the open interest ratio was 0.25. These numbers indicate that traders were heavily favoring call options – meaning they were generally betting that the price of Brent oil would increase.

Initially, this activity might seem like a positive sign. But considering the broader situation, it’s more likely traders are protecting themselves against potential problems. They seem to be buying call options as a safeguard in case the situation with the Iran blockade worsens. The decrease in open interest in futures contracts supports this idea – they aren’t expecting prices to stay high for long.

With implied volatility at 72.80% and ranking in the 88th percentile, the market expects significant swings in oil prices. However, a volatility rank of 50.18% shows that high volatility has been consistent throughout the year, largely due to the ongoing war.

Fewer people are actively trading futures contracts, while options traders are preparing for a potential market downturn. This situation doesn’t suggest a lasting recovery, but rather a temporary increase in prices that traders can profit from before it falls again.

Oil Price Levels That Determine the Pattern’s Outcome

Looking at the daily oil price chart, Brent crude is currently trading at $94.92. It’s approaching a key level at $97.05, which could act as resistance. If the price breaks above that point, it could then move towards $103.90.

Even if the price went back up to $103.90, it wouldn’t change the overall downward trend. Oil needs to close above $111.80 daily to show it’s truly reversed direction.

The price chart suggests more evidence supports a potential decline. If the price falls below $92.81, it would signal a weakening trend. A further drop to $89.39 would confirm a more significant downward move.

If the recent price drop is confirmed, a specific chart pattern suggests the price could rise around 28% from its current low. This potential increase points to a target price of about $65, which is also a known support level on the chart.

The price of oil is currently at $92.81, a critical level. If the price falls below this point, it could drop to $65. However, a rise above $111.80 would suggest the recent downward trend is over, although current trading activity doesn’t indicate that’s likely.

Read More

2026-04-16 12:16