Fundamental analytics

Brent: Spread between WTI and Brent continues to tighten

Brent

Oil market has closed yesterday’s trading session mixed. WTI crude grade has risen by more than 0,8% whereas Brent got cheaper by almost 0,4%. Opposite price action is first of all linked to the changes in overall market conditions. Lately the spread between these two crude grades is getting tighter quickly enough. Analysts relate this to a substantial growth of supply from the U.S. producers. According to the latest data oil export volume in the U.S. shortly will reach the new all-time high of 3,6 million barrels per day and probably may get even above this mark, that will provide tangible support to WTI.

Evaluating the overall situation on oil market we can mention, that in general a positive sentiment preserves here. First of all oil demand is maintained on a high level due to a threat of escalation of the conflict in the Middle East, that can drive to disruptions in energy carriers’ supply. Secondly, support ot the market is provided by messages regarding scheduled meeting of Donald Trump and Xi Jinping on G20 summit. Investors hope, that during this meeting the parties will manage to reach certain progress in clinching the trade agreement.

But the page one topic in the upcoming days probably will be OPEC+ meeting, where extension of production cuts agreement is going to be discussed. Analysts say, that the countries most likely will confirm extension of the agreement, but production quotas are scarcely going to be curbed, due to a stiff resistance expressed by the Russian Federation.

On the chart buyers manage to keep the price above the 63.30 level so far, therefore a prevailing scenario is growth of the quotes in direction of the 66.00 level.

Resistance levels:  66.00, 68.80, 72.50;

Support levels: 63.30, 61.00, 59.50.

Main scenario: Growth towards 66.00.

Alternative scenario: Gaining a foothold below 63.30 and correction towards 61.00.

Overall market sentiment is still positive. Bullish signals prevail on the chart. So, in short term we give preference to long-trades of the asset, that should be considered adjacent to the 63.30 level.