Brent Crude Breaks Out of Consolidation Pattern

Brent Crude has burst out of its wedge pattern, climbing over 7% from its December lows. But with macro uncertainties looming, can this breakout hold—or is it just a false dawn?

What’s Behind Brent’s Recent Rally?

A combination of factors has propelled Brent higher in recent weeks. Cold weather gripping the US and Europe has spiked demand for heating fuels, while fresh stimulus measures from China has reignited hopes for stronger oil demand from the world’s top importer. Additionally, US crude stockpiles have fallen, adding further momentum to the recent price surge.

OPEC’s decision to extend production cuts through 2026 underscores its focus on stabilising the market. However, rising US shale output could challenge this balance. If shale producers ramp up drilling in response to higher prices, it could cap Brent’s upside potential and introduce fresh volatility. Meanwhile, geopolitical tensions such as the ongoing conflict in the Middle East remain a persistent wildcard that will continue to influence prices in the months ahead.

The Technical Outlook: Breaking the Wedge

Brent's price action during the festive period and New Year has seen the market rally more than 4% last week and over 7% from its December lows. This consistent move higher was significant as it snapped the pattern of lower swing highs and higher swing lows. The breakout above key swing highs confirms that the wedge consolidation pattern—which had been forming in the final quarter of 2024 near the March 2023 lows—has finally been resolved.

While the Relative Strength Index (RSI) is showing upward momentum without veering into overbought territory, the breakout lacks a surge in volume to affirm its strength. Furthermore, although the market is comfortably above its 50-day moving average, it remains below the 200-day moving average, leaving room for caution.

For now, Brent’s technical setup suggests further upside is possible. Swing traders will be watching for support at the broken swing highs, as these could form the foundation for a short-term uptrend—especially if the market moves back toward the 200-day moving average.

Brent Crude Daily Candle Chart

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