The oil continues to the north of the trend, inspired by the increase of the forecast of the world demand of 1.7% of the International Energy Agency, the reduction of Saudi Arabia, exports to the lowest levels in the past three years, and the decline in production from Iraq, the second largest producer of OPEC by 260 barrels of oil per day. Baghdad has said that it has exceeded its plans brought in by the cartel, which is a «bullish» factor of the black gold. In addition, another role in his success is played by the state, suspension of the U.s. dollar.
As a general rule, autumn is not the best period for the Brent and the WTI. The end of the season of the automobile in the US led to a reduction in stocks. In addition, the Energy Information Administration reports that there is an increase in the production of 6.08 million barrels per day in October, encouraged by the higher prices of producers of oil shale. However, the hurricanes allowed to adjust the seasonal factor. For a long time, the black gold finally felt relief as the pressure of the growth of the drilling rigs from Baker Hughes. The decline in the indicator for two consecutive weeks, reached 749 (-7 on the results of the five-day period to 15 September).
As US refineries restart, the oil demand is expected to gradually increase and price support because of optimistic forecasts for the global index of the IEA and OPEC. At the same time, $50 per barrel for the WTI is a very dangerous figure. It attracts hedgers as the honey bear, so it will be extremely difficult to have a foothold above this mark.
As the value of the black gold rises, the matter is referred to the market: what are the limits? It is obvious that the end of the hurricane «Harvey» and «Irma», and the market transition to the normal state, the returns to the idea of the increase in U.s. production with the parallel of the insurance of the price risks. This combination of drivers has led to several occasions of attacks of the «bears». I do not think that something will change in the fall. You can talk to no end on the realization of the obligations of reduction of the production by members of OPEC. You can also discuss the extension of the agreement beyond March 2017. However, the fact remains: the U.s. and will continue to use the favourable economic conditions for them.
The dynamics of the dollar is of little importance. Since Brent and WTI are expressed in that currency, the growth of the index of the dollar leads to a rise in the cost of imports in the larger countries consumers, and vice versa.
The dynamics of the dollar Index and Brent
Source: Trading Economics.
In this regard, the expectations of the beginning of the process of normalizing the Fed’s balance sheet and an increase in the probability of an increase in the federal funds rate from 33% to 58% of special, the joy of the «bulls» that the black gold is not in a position to provide. On the other hand, the positions of the euro against the backdrop of the ECB’s desire to roll back QE look strong. After all, it has the largest share in the dollar index. Thus, the consolidation of the EUR / USD does not place obstacles in the path of the black gold to the upward trend.
Technically, a break of resistance 55.95 will Brent bulls to continue the rally in the sense of the following objectives (200% 224%) in the AB = CD pattern. On the contrary, the inability of buyers to take a significant level by the storm will show their weakness and increase the risk of a correction of $ 54.7 and 53.1 per barrel.
Brent, daily chart