Fundamental analytics

Brent - Bullish trend preserves on the market.


Having renewed the highs of more than four months trading Brent crude couldn’t cope with pressure and during yesterday’s trading lost more than 1% in price. Correction was determined by technical as well as fundamental factors. In the market spotlight was OPEC monthly report, according to it member countries of the cartel continued oil production cuts in February and complied with the Vienna agreement by 106%. In general it’s a positive signal for the market, but in published report there was information, that caused negative influence on trading. Traders pointed out the information on growth of oil supply from the non-OPEC countries. Growth made 2,74 million bpd reaching the level of 62,12 million bpd. Supply from the cartel, in its turn, makes 30,55 million bpd. According to OPEC data during last month Canada, Russian Federation, USA, Kazakhstan and Qatar, which left OPEC starting the 1st of January 2019, has substantially built up their supply.

Today oil market gradually recovers yesterday’s losses on background of IEA monthly report release. According to data of the agency in February oil supply volumes to global market decreased due to OPEC actions and breaks in crude supply from Venezuela. Also according to IEA data global output in February decreased by 340 thousand bpd. But if we compare this rate with the same period of last year, in 2019 output level remains higher by 1,5 million bpd.

In general data published this week on statistics from USA and international organizations produced positive effect on the market facilitating growth of the oil prices to the peaks since the beginning of the current year.

An important role in oil market recovery was played by other factors as well: decline of the US dollar rate and prevailing of positive sentiment on equity markets. Influence of the first factor makes the oil price lower for investors, who have funds in alternative currencies. Influence of the second factor lifts interest in oil as to risky, but profitable asset.

Today investors will pay main attention to release of weekly report from Baker Hughes on drilling activity. For the last weeks the data showed decline in oil rig count, therefore maintenance of this tendency can amplify support for oil market.

On the chart, despite the failure to gain a foothold above the 67.50 level, bullish trend is still in progress. Level 67.50 is losing its influence on the market. Buyers managed to guard the support at 67.00 and shortly we can see development of new upward wave in direction of the 68.00 level and probably even more perspective target at 70.00.

Resistance levels: 67.50, 68.00, 70.00;

Support levels: 67.00, 66.50, 65.50.  

Main scenario: Growth towards 68.00.

Alternative scenario: Stabilizing below 67.40 and decline towards 67.00.

Bullish trend preserves on the market. Signals of fundamental and technical analysis confirm this movement dynamics in general. Therefore we should give preference to long-trades, that can be sought intraday at the 67.40 level.

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