13.12.201701:43 Forex Analysis & Reviews: Brent is swimming in the North Sea

The speculators did not have time to properly unwound the profits on long positions in oil after the announcement of the results of the OPEC meeting. The meeting presented a message saying that the disconnection of the pipeline belonging to the British company Ineos led to the growth of quotations of futures for Brent above $ 65 per barrel. The last time the North Sea variety was seen at the current levels was in mid-2015 and the uncertainty about the timing of commissioning of an important link in the system of delivering black gold from the North Sea increases the risks of continuing the rally.

Through the failed pipeline system about 445,000 bpd are delivered. It extends for 235 miles and connects 85 oil and gas assets which account for about 40% of the entire British extraction in the North Sea. Supply problems, coupled with the prolongation of the agreement between OPEC, Russia, and other producers, increase the chances of global stocks reaching their five-year averages much earlier than what investors expected. At the same time, those refineries that worked with Brent are forced to look for alternative suppliers. In this respect, the expansion of the differential between the North Sea and Texas black gold grades to $ 7.3 creates favorable conditions for US exports.

A holy place is never empty and companies from the US are ready to occupy an important niche while increasing production volumes. Currently, it is 9.71 million bpd which is the maximum mark since the 1970s. Since mid-2016, the indicator has grown by 15% and does not seem to be slowing. Rising prices allow the Americans to actively hedge risks through futures contracts so that even their eventual fall is unlikely to seriously reduce production. Indeed, at a time when China is increasing its oil imports from the United States to a record 293,000 barrels in November and Thomson Reuters estimates it is prepared to maintain it at a high level of 281,000 barrels in December, it becomes clear that Washington enjoys favorable conditions and pulls the blanket over.

Together with the seasonal increase in black gold reserves in the United States, the situation does not look good for bulls but prices are rising. Goldman Sachs expects that in 2018, they will rise by another 15% against the backdrop of an increase in global demand. According to the OECD estimates, all 45 members of the organization will be marked by GDP growth in 2017. This occurred only three times in the past half century and the IMF predicts the acceleration of the economies of developing countries from 4.6% in the current 4.9% for next year.

Dynamics of MSCI and commodity index

Source: Bloomberg.

Thus, on the side of the "bulls" for Brent and WTI, there are strong global demand through the efforts of OPEC, Russia, and other parties to push the agreement on the reduction of production as well as interruptions in supplies from the North Sea variety. However, if US statistics show growth in inventories and production then speculators will once again think about fixing profits.

Technically, to continue the rally in the direction of the target by 161.8% on the parent pattern AB = CD, the "bulls" need to gain a foothold above the support at $ 65.1 per barrel.

Brent, daily chart