25.04.201801:45 Forex Analysis & Reviews: Brent ignores Donald Trump

Looking at how sensitively the currency and stock markets react to his twitter, Donald Trump decided to try the strength of his voice on raw materials. According to the US President, in circumstances when the storage facilities are flooded with oil to the very ears, OPEC artificially maintains very high prices. Brent and WTI reacted by a decrease of approximately $1 per barrel for each of the grades, but then quickly regained lost positions, returning to the highest level since November 2014. That is, those times when the cartel decided to cut production in order to stabilize the market. After 3.5 years, its effectiveness became apparent.

Success did not come immediately, but only after Russia and other producers joined the OPEC treaty. As a result of hard work and fulfillment of their obligations, global reserves returned to the levels of their 5-year averages. At the same time, the cartel has not yet given a single signal about its intention to curtail the deal, and Saudi Arabia claims that the world economy is able to withstand oil at a price of $75 per barrel.

Implementation of commitments by the OPEC countries

Whatever Riyadh was thinking, judging by Donald Trump's twitter, Washington is already beginning to show concern. States actively import oil, which increases the deficit of their trade balance. And it is the state of foreign trade that the US president is obsessed with, which is proven by the introduction of import duties on steel and aluminum. The owner of the White House has the opportunity to moderate the appetites of the "bulls" by Brent and WTI, who recently feel too freely (the ratio of long and short positions in the North Sea grade is 14 to 1). In order to do this, he needs the help of US shale producers. According to Wood Mackenzie's research, in order to generate free cash flow, these companies needed a price of $53 per barrel for the Texan grade. At the moment, it costs $69, so they have the opportunity to introduce new drilling rigs at their own expense.

In fact, not everything is so simple. First, shale producers face difficulties in increasing production, including the limited capacity of pipelines, the presence of intermediary companies and the need for consolidation in the industry. Secondly, the rise in prices leads to the emergence of petrodollars in the producing countries, which then enter the world economy and increase demand. These factors allow Goldman Sachs to predict a continuation of the Brent rally in the direction of $82.5 per barrel.

Let Donald Trump blame OPEC for the high price of oil, in fact, it was not without its intervention. OANDA believes that if Washington returns sanctions against Iran, the prices will rise by another $5.

Technically, the implementation of the target by 200% for the subsidiary of AB = CD and the formation of the "Three Indians" pattern increase the risks of rollback. Nevertheless, while quotes of Brent are above $72, the situation is completely controlled by the bulls.

Brent, daily chart