Fundamental analytics

Brent: Oil market is on the way to recovery


Oil market continues to recover after a very strong decline of the quotes during the last two weeks. Support to the quotes was provided by the situation on stock markets as well as by geopolitical news, that facilitate the prospects of growth of demand in crude oil. Today China has reported on growth of crude oil import in May by 3% comparing to the same period last year. Since the beginning of the year oil import has increased by 7,7% comparing to last year, that somewhat eases concerns regarding the lowering of demand due to aggravation of the situation in international trading and slowdown in global economy development. But some analysts say, that growth of crude oil import is first of all linked to the upcoming launch of several giant refineries in China. It was confirmed by the fact, that import of oil products in China has decreased by 15,3% in May comparing to the same period last year.

Positive influence on the oil market is produced by overall upturn in sentiment on stock markets. Successfully performed negotiations between USA and Mexico and also re-establishing of the contacts on a higher level between USA and China are easing concerns of investors regarding aggravation of the situation in international trading and increase investors’ appetite to risk.

Today investors also play back the data from Baker Hughes on decrease of active oil rig count in the U.S. to the troughs since February 2018. Investors hope for decline in crude oil production in the United States.

On the chart we should mention the support formed at the 61.40 region. The price has resumed upward movement from this level and keep very good chances for continuation of this tendency. Mid-term target for buyers is the 66.00 level. Within intraday time-frame we should keep an eye on resistance at the 63.80-64.20 region.

Resistance levels: 63.80, 64.20, 66.00;

Support levels: 61.40, 60.00, 58.50.

Main scenario: Growth towards the 63.80-64.20 region.

Alternative scenario: Downward movement towards 61.40.

Positive sentiment prevails on the market, that should facilitate further growth of the crude oil quotes. Therefore within intraday time-frame we consider long-trades of the asset, that should sought at the 61.40 level.

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