SOVA Capital still sees upside potential for Brent in 2019

His comments came even as news broke that Saudi was more than willing to open the taps completely to offset any shortfall in global supplies as the sanctions against Iran kicked-in, sending Brent crude oil futures lower by more than 4% on Tuesday.

Speaking at a conference in Riyadh earlier during the session, Saudi oil minister, Khalid Al-Falih, said the Kingdom's output was running at 10.7m barrels per day, near an all-time high, and that it could increase it even more, if needed, in order to meet any shortfall in supply as the US implemented its sanctions.

Already at the start of October, Brownstein had told clients to cover their 'long' positions and go 'short' via the purchase of 'put' options expiring in December, judging that the 'rally' in crude oil futures was "overdone".

And now he recommended converting the outright puts into so-called 'put spreads'.

His reasoning for that, in layman's terms, was that by doing so clients could "fix part of the profit" from their short position while keeping the put-spreads to expiry, as the position and tactical action had already generated them a profit on the transaction which might turn out to be even more profitable due to structure and expiry.

In any case, from a technical standpoint Sova's strategist did see scope for Brent to move higher still, explaining that it might set a new high in the first half of 2019.

But first, it remained to be seen just where the current "correction" in prices would stabilise, he said, adding that it appeared that the futures curve for ICE-traded Brent would soon follow West Texas Intermediate into so-called 'backwardation', which might add to the selling pressure on oil prices.

Brownstein's views appeared to be broadly in-line with those of other market watchers, with Oxford Economics having pointed out as recently as 11 October the risk that oil prices might rise to $100 a barrel.

On a similar note, in remarks to Bloomberg TV, also on Tuesday, Morgan Stanley's Chief Cross-Asset strategist, Andrew Sheets, said oil prices were likely to head towards $95.0 a barrel towards the middle of 2019, on the back of a lack of spare capacity.

However, in the near-term oil demand from emerging markets might be dampened as their currencies weakened versus the US dollar and because refinery runs were due to fall for seasonal reasons, both of which might weigh on crude oil futures, Sheets said.

Concerns around the degree of spare production capacity were being stoked by worries that sanctions against Iran were set to increasingly begin to bite, together with supply problems in major producers such as Venezuela.

Although the more recent news-flow had shown that both Saudi and Russia had been raising their levels of output, some analysts said that until recently OPEC had in fact shown a reluctance to fill the output gap left by Iran.

In any case, given the recent steep selling seen across asset classes and strength in the Greenback, and when queried about potential 'worst-case' scenarios, Brownstein was clear that Brent futures might not be able to hold up.

"If global capital markets crash, and the US dollar strengthens, there is no chance that oil will be able to stand its ground for long," he told WebFG UK.

From a technical point of view, according to WebFG UK's chief technical analyst, Jose Maria Rodriguez, the bullish medium-term trend in oil was still absolutely intact, although in the immediate short-term a 'test' of the lower part of the current upwards-sloping price channel might be on the cards - towards the $76.0 per barrel level.

That area of price support may be reinforced by Brent's 200-day moving average, he said, which as of Tuesday was to be found at roughly $73.70 a barrel.