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Since the beginning of the year, futures quotes for the North Sea oil have grown by 12.8%, leaving the experts of the Wall Street Journal as fools. Analysts in December forecast an average price of $57 per barrel in the first quarter. In fact, it turned out to be $67. Moreover, in May, Brent reached a mark of $76 per barrel, the highest since November 2014. As an excuse, economists present geopolitical shocks, which generally cannot be predicted. Well, we must admit that the main driver of the 10% rally in oil over the past month has been the risks of resuming US sanctions against Iran, which few people paid attention to at the end of 2017.
About two years ago, Tehran managed to convince former President Barack Obama in the absence of a nuclear program. The restrictions were lifted, which allowed Iran to increase oil production by approximately 1 million b/s. The new owner of the White House has repeatedly criticized his predecessor for wrong actions, and said that on May 9 he will announce his own verdict whether or not sanctions should be renewed. According to RBC Capital Markets, this will lead to a reduction in exports from the Middle East by 200-300 thousand b/s. As for the reaction of the market, opinions are divided.
The dynamics of Iranian exports and oil production
According to PVM Oil Associates, Washington's withdrawal from the deal with Tehran, reached a couple of years ago, will allow the Brent crude to reach $80 per barrel. On the contrary, the absence of sanctions will lower the quotes of futures for the North Sea oil to $65. A similar position is held by Barclays. The bank believes that the geopolitical consequences of a possible dismantling of the agreement are a more serious "bullish" factor for oil than the uncertainty of the White House's policy on this issue.
In my opinion, one must be guided by the principle "buy the rumor, sell the fact". By itself, Brent's 10% growth over the course of the month suggests that investors have pegged the Iranian factor in the quotes. And now we are ready to lock in the profit on long positions after the statement of the US president about the resumption of sanctions. Risks of a correction of oil appear to be significant, however, its potential looks limited. The market will once again return to the idea of a tug-of-war between US producers of shale oil and OPEC. At the same time, the insufficient capacity of pipelines in the United States will exert pressure on the "bears". On the contrary, support for the "bulls" can be provided by the continuing growth of global demand and the reduction of Iranian exports.
As a result of April, the world's largest buyer of oil in the face of China imported 9.64 million b/s, which is 4% more than in March. This is a new record. Previously, 9.61 million b/s was recorded in January. China leads global demand, allowing OPEC to pull the rope to its side.
Technically, after reaching the convergence zone at $76.15-77 per barrel, identified with the help of targets by 224% and 161.8% on the subsidiary and parent patterns AB = CD, the risks of a pullback increased. The situation is aggravated by the formation of the reversal model of the "Three Indians".
Brent, daily chart
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