Fundamental analytics

Brent: Oil market remains under solid pressure.


After a slight correction crude oil resumed downward movement after release of the data from American Petroleum Institute on unexpected growth of oil inventories last week. After a decline by 5,3 million barrels oil inventories rose by 3,5 million barrels increasing likelihood, that the data from US Department of Energy today will be released worse than analysts’ forecasts, who expect decline of inventories by 0,8 million barrels.

In general crude oil together with other dicey assets (shares, commodities and etc.) remains under strong pressure on the back of growing concerns regarding slowdown in global economy. Important economic indicators of the key regions indicate a slowdown in growth, that can have a negative impact on energy demand dynamics. Today World Bank has lowered the forecast on global economy development for the second time this year from 2,9% to 2,6% and forecast on growth of international trading was curbed from 3,6% to 2,6%.

Serious concerns were entailed by dissents in the OPEC+ camp regarding extension of the production cuts agreement. So far the countries are even unable to schedule the meeting date, where the further destiny of the pact will be defined. Many experts say, that on the back of the latest events OPEC countries will be forced to proceed with prolongation of the agreement, but its content is quite arguable. Russia has claimed many times, that it’s intended to boost production in the second half of the year, that may trigger tangible contradictions with OPEC countries during discussion of the production curbs.

Today the main driver on the market should be the data 0n inventories from the US Department of Energy. If real indicator is worse than expectations we can see a new wave of sell-offs on oil market.

On the chart a correction develops from the very strong support level 60.00. Nevertheless globally the trend is still bearish, therefore shortly we can expect resuming of downward movement and new attempt to break the support at 60.00. For sellers the waymarks will stand at the local resistance levels 62.00 and 62.80.

Resistance levels: 62.00, 62.80, 63.50;

Support levels: 60.20, 59.70, 59.00.

Main scenario: Growth towards 62.80 and resuming of downward movement.

Alternative scenario: Decline from current levels.

Fundamental background on the market is still negative. A downward tendency prevails on the chart. Therefore within intraday time-frame we consider short-trades of the asset seeking them at the 62.00 and 62.80 levels.

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