The markets may be punished for vanity. For a long time, investors ignored the geopolitical risks, and the confidence that the North Sea oil quality must be indicated in the range of $40 to $ 60 per barrel for the long term. The reason is that prices have risen above the level of resistance that will probably increase production in the UNITED states, and fell below the support level will be the reason for its reduction. Unfortunately, the result of the strategy has started to fail for a long time after that the market returned to the balance sheet. This has led to the reserves of the countries of the OECD to reach above their five-year average of 170 million barrels, but the difference from the beginning of the year has been reduced by half, indicating the effectiveness of the Vienna, the OPEC treaty.
It is one thing for the geopolitician in the periods of global surplus, when conflicts worsen and causes only short-term increases in the price of the black gold. Another situation is to consider it as a factor in the long term. The military clashes between Iraq and Kurdistan, which reinforce the risk to the export suspension around 400 000 barrels per stream day. If Turkey wants, it can block all supplies to 600 000 barrels per stream day, which will increase the chance that the market will move with a deficit. At the same time, this will help to overcome the Brent psychologically important mark of $60 per barrel. The main objective is that OPEC is not going to miss, and has extended the agreement on the decrease in production beyond March 2018. The decision to ride will be concluded in November, and it seems that investors have already believed in a favorable outcome.
The OPEC shares, bringing the oil market to equilibrium
Source: Financial Times.
According to the IEA, the cartel in September completed its Vienna obligations of 86%, which is a little higher than in August. OPEC itself predicts that, by 2018, the demand for oil will increase to 33.1 million barrels per stream day, which is 200,000 more than the previous estimate. The main reasons are cuts in supplies from other countries and the growth of global demand. From this last point of view, China’s active efforts to establish domestic reserves of black gold are important. In September, oil imports from the Celestial Empire jumped to 9.03 million barrels per stream day, which is the second biggest indicator of the history and 11% higher than last year.
For Kurdistan, the OPEC is ready to extend the agreement of Vienna and the growing demand from China has added more risk to the recovery of economic sanctions against Iran and the effectiveness of the implementation of the agreements on the cessation of the production of nuclear weapons, which the U. S/ President Donald Trump called into question. Previously, it was about the loss of nearly 1 million barrels per stream day of exports from Tehran, and if history repeats itself, then the quotes of Brent may go well beyond $60 per barrel.
Technically, the month of September-art-update of nearly $59.5 brand enable the AB = CD pattern and increase the risk of the sale of its objectives 127.2% and 161.8%. These are located near the mark of $60.7 and $62.3 per barrel. For the «door» to expect a correction, they need to take the price of Brent crude below the lower limit upward trading channel and take out the resistance at $55.9.
Brent, daily chart