Bank of America technical analysis continues to flag meaningful upside tail risks for oil prices even after Brent’s recent ascent toward $120. Brent crude jumped above $100 and reached $119.50 on Monday - a move that BofA technical strategist Paul Ciana characterises as fitting "the pattern of a short-term peak ahead of a consolidation/correction in price and volatility."
Despite labelling the recent surge as likely preceding a corrective phase, Ciana’s technical framework does not rule out much higher headline-driven outcomes. "Headline driven tail-risk levels of $134/$150 remain possible even after the spike, though a lower probability post spike," he said. The strategist added that trading is expected to remain reactive to headlines and somewhat volatile, with the potential for a higher trading range to form while those tail-risk targets still exist.
On medium-term dynamics, BofA anticipates a consolidation period following the sharp rally. The move of Brent toward the $120 area coincided with the 76.4% Fibonacci retracement level, which Ciana identifies as a potential end point of the current upward wave and the likely beginning of a correction or a range-bound phase.
Using past supply shocks as a guide, the strategist suggested oil could spend the coming months trading within a narrowing band of approximately $90 to $110 as markets work through the implications of the recent price spike. Such a range would reflect a digestion of the headline-driven volatility that propelled prices higher.
Ciana also set out a condition that would reduce the prospect of another upward wave: a clearly formed top and/or a decline below the prior wave high at $81.40. "To reduce the possibility of a future wave up, we’d prefer to see oil form a top and/or fall below the wave high at $81.40 to shift wave patterns to a bearish scenario," he said.
In addition to the price-level analysis, the strategist noted oil’s relative strength versus other major assets. Ratios of oil versus bonds, the S&P 500, copper and gold have moved higher in recent months, indicating that oil has been outperforming these benchmarks.
Overall, BofA’s technical read is balanced: the recent $119.50 spike aligns with a short-term peak that often precedes consolidation, but headline-driven supply or geopolitical shocks could still produce elevated tail-risk targets in the $134 to $150 area, albeit with reduced probability after the recent rally.