Fundamental analytics

Brent: Oil market is trying to regain the losses.


Oil market was able to reclaim some positions on Friday, that were yielded after a decline by more than 5% during the trading session on Thursday. Recovery of the quotes was facilitated by technical factors (many investors started to close short positions during decline of the quotes to the two-months lows) as well as by certain fundamental events (recovery of stock markets, some kind of stabilization in the Middle East and data on decline in oil rig count in the U.S.).

Traders still have big concerns regarding the situation in global trading and growth of oil inventories in the U.S., that indicates an oversupply of crude oil on local market. A very low margin of refineries in USA facilitates the reduction of the plants’ workload and growth of inventories to the many-months peaks.

In turn an escalation of trade tension between USA and China can have a solid impact not only on development of both countries’ economies, but the situation in the world in general. Slowdown in global economy can lead to curtailment of oil demand level and decline in its cost. Aggravation of the situation in global trading also reduces investors’ interest in dicey assets including crude oil. At this moment the main way-mark for investors is the 2019 G20 summit, where the meeting of USA and PRC leaders has to take place.

China retains the position of the world’s biggest oil consumer, therefore further slowdown of economic growth may have negative influence on the level of internal demand. On this matter investors hope for launch of the three big refineries in China, that may increase oil demand. Since in the United States Monday is a day-off the data of industry statistics from API and US Department of Energy will be released a day later this week - on Wednesday and Thursday correspondingly.

On the chart a corrective movement develops having a potential target at the 68.80 level. But a confirmation of further development of this corrective movement will be received only after stabilizing of the price above the Friday’s high at 67.80. If buyers fail to overcome this mark, then in medium term a bearish movement scenario with target at 66.00 will be prevailing.

Resistance levels: 68.80, 71.10, 72.50;

Support levels: 67.00, 66.00, 65.50.

Main scenario: Growth in direction 68.80.

Alternative scenario: Gaining a foothold below 67.00 and decline towards 66.00.

Upward correction develops on the chart, that can be extended shortly. Therefore within intraday time-frame we should give preference to long-trades for this asset, that should be considered from the 67.00 level.

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