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  • The Brent oil rally is looking overstretched for the first time since November 2017.
  • OPEC is seen having a little or no spare capacity to fill Iran loss.

Brent oil looks most overbought since January, according to 14-day relative strength index (RSI) of 76.28.

At press time, the front-month contract is trading at $84.90 per barrel, having clocked a four-year high of $85.42 yesterday.

Prices have rallied almost 21 percent in the last seven weeks and could rise even further as the markets fear that OPEC heavyweights and other major producers like Russia do not have enough spare capacity to compensate for the drop in Iranian oil supply after US sanctions against Tehran start in November.

However, the RSI and other technical indicators are signaling that the rally is overdone and a pullback could be in the offing, although the dips could be short-lived as Iran sanctions will likely continue to underpin sentiment.

Further, the outlook would remain bullish as long as the 5-week and 10-week exponential moving averages (MAs) is trending north.

Brent oil Technical Levels

Resistance: $85.42 (previous day’s high), $88.52 (June 2012 low)

Support: $82.78 (100-month EMA), $80.00 (psychological level)