Brent crude is going through a period of extremely low volatility – in fact the lowest level in more than a decade – and this makes for an interesting situation.
This is because periods of low volatility for asset prices are usually followed by periods of high volatility, accompanied by the emergence of a strong trend. Investors can use this nature to give themselves an edge.
Brent crude is used as a benchmark to price European, African and Middle East oil that is exported to the West – and therefore closely followed by traders.
The current low volatility suggests a strong directional move is likely in the coming weeks, with Brent due to break out of a three-year-long sideways consolidation.
Investors should now be watching for a directional breakout, either upwards through the key resistance level of US$115 or downwards through the support level of $103. A move in either direction is likely to be an indicator of the future long-term direction of Brent.
Askel Kibar is the chief technical analyst at Invest AD
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