Fundamental analytics

Brent: Trump’s comments put pressure on oil prices

Brent

Oil market has closed yesterday’s trading session with a tangible drop down. WTI price sank almost 3% and Brent was down more than 2,5%.

The major pressure on the price was produced by Donald Trump’s comments regarding the flow of trade talks with China and negotiation process on Iranian nuclear program. Trump was explicit saying, that it’s not worth to expect signing of trade agreement with China shortly since the parties need to coordinate a lot of questions yet. For oil market that means further curtailment of demand on the back of slowing economic activity in the key regions of the world.

Unexpectedly for many traders Trump has announced a progress in negotiations on Iranian nuclear program, that actually can signify de-escalation of conflict in the Middle East.

An extra factor, that puts pressure on the market is news about easing of hurricane “Barry” and weaker than expected API data on inventories. According to API report oil inventories in the country were dragged down by 1,4 million barrels for the week whereas according to analysts’ forecast U.S. Energy Department report has to show decline by 2,7 million barrels. If actual data today proves to be worse than expectations, it’s quite likely, that crude oil may continue to move lower.

On the chart a true break of the 66.00 is recorded. It’s a solid bearish signal, that establishes new target for price movement at the 62.50 level.

Resistance levels:  64.35, 66.00, 67.30;

Support levels: 63.40, 62.50, 61.00.

Main scenario: Decline towards 62.50.

Alternative scenario: Stabilizing above 64.35 and growth towards 66.00.

A steep switch of fundamental background from moderately-positive to negative took place on the market. Bearish signals prevail on the market. For intraday trading we consider short-trades of the asset from the 64.35 level.

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