Brent Flew Out of the Cage




«The oil will go on the side where the Prince in Saudi Arabia sneezed,» this sentence has been popular in the market a few years ago, which stressed the importance of Riyadh for the market of black gold. Since then, the situation has changed significantly due to the activity of the slate producers in the united States that forced the players to rely with them, but the old stories appear now and again. The statement made by the Prince of Saudi Arabia Mohammed bin Salman about the country’s commitment to extend the Vienna, the OPEC agreements on the reduction of the production until the end of 2018, has become one of the main engines of growth for Brent prices above the psychologically important $60 per barrel. In the case where the president of the Russian federation and Saudi Arabia had blue-blood speaks of the same thing, the case will clearly burn out.

The country producers of black gold in recent years has had a very difficult time. In the conditions of the «bear» markets, the Brent and the WTI were forced to work in the negative. According to the IMF, the break-even point in Riyadh in 2016 was $96.6 per barrel. In 2018, the figure increases to $70 per barrel. It’s about the price that supports the achievement of expenditure plans and to have a balanced budget. Without any doubt, Saudi Arabia is at the beginning of the use of the rhetoric that supports the «bulls» to a very small point of balance.

Profitability thresholds of the OPEC countries

Source: Bloomberg.

Commerzbank noted that the comments of the public of Princes on the oil are rare, indicating the firm intention of the Saudis to reduce the global reserves of black gold to the level of 5-year averages. Since the beginning of the year, the gap between the actual data and the average value of the indicator declined by 160 million barrels, and this has created a solid base for the rally of Brent and WTI.

Along with the news of the possible extension of the Vienna, the OPEC agreements, the increase of the geopolitical conflicts in the Middle East supports the «bulls». After the attack by the Kurds, the federal troops of the province of Kirkuk, the black gold of the exports from northern Iraq resumed. At the same time, the intensity of the situation, and Tehran accuses Russia of «Rosneft» in the conclusion of contracts with the Kurdistan region without the consent of the country, the official authorities.

Apparently, it is surprising to note that the increase in price does not have the money of speculators. By the end of the week, the net longs in Brent have increased by 2.6% to 506737 contracts by October 24. The indicator feels comfortable in the vicinity of the registration of marks, which was held in September. Net bottom for WTI has increased for the first time in the last four 5 days. This behavior of the major players suggests that confidence in the evolution of the trading range at higher levels relative to current levels. Over the past 16 months, Brent has been reluctant to leave the border of the channel at $ 45 to $ 55 per barrel, is this the right time to do it?

Technically, the North Sea variety managed to reach an interim target of 127.2% AB = CD pattern, after which a natural cancellation occurs. The situation continues to control the «bulls» and the rebound from the support at $ 59.5 per barrel or the renewal of the October high to open the way to $ 62.3.

Brent daily chart



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