15.01.201915:56 Forex Analysis & Reviews: Oil rollercoaster ride

The week by January 11th turned out to be the best for black gold in the last six months. As a result, the North Sea variety expanded the correction to 20% of 18-month bottom levels but continues to trade 30% below the October highs. Factors such as the entry into force of the agreement between OPEC and other producing countries to reduce production by 1.2 million b/s, the uncertainty regarding the grace period for oil imports from Iran, the decline in US reserves and the number of drilling rigs from Backer Hughes from 888 to 873 favor the correction Brent and WTI. However, the problems of global demand periodically inspire bears to counterattacks.

Thus, Bloomberg experts unexpected the education in Chinese exports and imports in December became a catalyst for sales of black gold, reinforcing concerns about a slowdown in China's GDP. An Official in Beijing immediately issued a statement of readiness to stimulate the economy in the monetary and fiscal spheres. At the same time, a reduction in taxes and norms for deductions to the mandatory reserves fund, as well as an increase in infrastructure investments in 2018, should be felt soon. At least the OECD notes that the Chinese economy is likely to find its footing.

Looks pretty curious picture in the US, Bloomberg experts expect reserves to drop by 2.5 million b/d following the week by January 11. As a result of which, the figure may fall to its lowest level since November. If we add to this the problems with the increase in the number of drilling rigs, then it can be assumed that the US oil industry is working at the limit. However, Goldman Sachs notes that the "bullish" market allowed US producers of shale oil to add 0.86 million b / d from June to August. This is the best indicator for the entire history if we ignore the recovery periods after the hurricanes. If in the current conditions on the background of the correction of Brent and WTI, it will grow as fast, the rollback will not last long.

Excessive oversold of oil in the face of potential improvement in global demand, the problems of American producers and the reduction in OPEC production force speculators to get rid of short positions in the North Sea variety. At the end of the week by January 8, their value fell by 3.6%, which expanded the net longs to 158,146 futures and contracts options(+ 3.8%).

Dynamics of Brent and speculative positions

It is possible that black gold will continue to ride the roller coaster, but the median forecast of the average price among more than 100 experts surveyed by Reuters for 2019 remained unchanged at $ 65 a barrel. By 2020, it has been lowered from $70 to $65. Last year it was about $ 70. Thus, economists expect that OPEC and Russia will manage to balance the black gold market.

Technically, after reaching the intermediate target of 78.6% for the "Shark" pattern, a regular rollback went in the direction of 23.6%, 38.2% and 50% of the CD wave. If the bulls manage to keep Brent quotes above $ 58.7 per barrel, the risks of a correction to a downtrend will increase.

Brent daily chart