Fundamental analytics

Brent: Energy market retains downward movement vector.

Brent

NG

Natural gas price continues to go down actively renewing the lows of mid-2016 on the back of substantial lowering of demand in this asset. Just for the previous day the price has tumbled by more than 1,7% and during May total decline has made more than 6%.

One of the drivers for development of new bearish wave was data of the industry statistics from the U.S., that indicated growth of gas inventories for the reporting week by 114B against the expected growth of this indicator by 101B. This data shows, that favorable weather conditions facilitate decline in real gas consumption and due to this Energy Department continues to gain gas inventories actively for the heating season. Since demand for this asset declines, its market value also retains downward movement vector.

On the chart the key support level 2.520 is broken, that triggered slump of the price to the 2.370 region. As we see, today attempts of buyers to develop a corrective wave failed and the price has resumed downward movement from the 2.410 level. Therefore we expect development of bearish wave from current levels and renewal of the local low.

Our recommendations: Short-trades from 2.410

Brent

Oil market also preserves bearish movement trend on the back of the increased risks regarding the energy demand level and substantial lowering of investors’ appetite for risk.

New decision of the White House administration about applying new higher tariffs on Mexican goods can have a tangible impact on oil supply volumes from the Gulf of Mexico. According to analysts estimates in case raising tariffs by 10% starting July 1 the purchase price will grow by $6 in average, that will lead to curtailment of supply volumes to the minimal acceptable level according to earlier secured contracts. At the same time many refineries endure the serious lack in heavy crude oil already, that was delivered from Venezuela before.

Investors also have serious concerns about the situation in international trading. Confrontation between USA and China has caused quite a solid negative influence on global economy development, that rises risks of decline in global oil demand. Since the situation continues to get worse, investors actively sell crude oil and invest their money in more reliable assets to provide risk diversity.

On the chart the price approaches to the important psychological mark at 60.00. It’s a key support level for the price at this moment from where we can expect a development of corrective wave. But if bears manage to break this mark the trading will move to a new range with lower boundary at the 52.00 level.

Our recommendations: Short-term long-trades from 60.00.

 

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