Fundamental analytics

IEA has revised the forecast on oil demand.


Oil market was able to regain some of the previously lost positions on the back of spike in investor’s appetite for risk. Last claims of Donald Trump on the probability to reach the trade agreement between USA and China has provided tangible support to stock indices, that managed to regain the major part of Monday losses. Correspondingly crude oil, that closely correlates with the major stock indices, has been traded in the green as well. One more support factor for market were messages on damage of oil pipeline in Saudi Arabia. According to official reports the major oil pipeline got damage after it was hit by armed drones.

Today oil market is being traded in the red on the back of monthly International Energy Agency report release. According to the report curtailment of crude production was observed in Iran and non_OPEC countries in April, that facilitated the growth of oil prices for the reported period up to 5-months peaks. In general the decline of global oil supply for the month has dropped by 0,3 million bpd to 99,3 million barrels.

Alongside in IEA for the first time since October 2018 they have curbed the forecast on energy demand given the negative tendencies in the economies of Asian countries, decline in fuel consumption in the first quarter of the current year in China, Japan and Brazil as well as risks linked to the situation in global trading.

One factor that puts pressure on oil market was the data of economic statistics from China (which remains to be the world’s major oil consumer) published today. According to the report’s data the volume of industrial manufacturing in the country has risen by 5,4% while the expected growth of the indicator was 6,5% and the major capital investments have increased by 6,1% versus the forecast of 6,3%.

During American trading session the main attention of the market will paid to the data from the US Energy Department on dynamics of oil inventories for the week. Analysts predict decline of the indicator by 0,8 million barrels.

On the chart we note unsuccessful attempt of buyers to overcome resistance at 70.75. The price has bounced to the downside marking the validity of horizontal channel 68.65-70.75, where the price has spent quite a long time.

We should reckon on forming of more directed movement of the asset only after stabilizing of the price beyond one of the sideways channel boundaries.

Resistance levels: 70.75, 72.00, 73.20;

Support levels: 68.65, 67.00, 66.00.

Main scenario: Consolidation in the 68.65-70.75 range.

Alternative scenario: Settling above 70.75 and growth towards 72.00.

Locally on the market a neutral sentiment preserves, that facilitates the development of sideways movement between the levels 68.65-70.75.

Therefore now for this asset we can consider longs as well as shorts from the boundaries of the marked price channel.

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