27.11.201816:27 Forex Analysis & Reviews: Oil used joker

Moscow, Washington, and Riyadh will decide the fate of black gold

When prices are falling rapidly, I always ask myself the question, who benefits? In the face of slowing global demand, the value of oil production in the process of determining its value increases. The largest producer countries in the face of Russia, the United States, and Saudi Arabia account for a third of world production. Each of these countries can afford to pump more than 11 million b / d. The positions of Riyadh and Washington differ, and the future of Brent and WTI will depend on who Moscow joins.

Donald Trump's numerous appeals to OPEC and his praise of Saudi Arabia amid the transfer of black gold to the territory of the "bears" make it clear. States want to see cheap oil. At the same time, the current collapse of Brent and WTI is comparable in scale with the events of 2008 and 2014. In the latter case, the fall in capital expenditures in the oil industry and massive layoffs of employees put a heavy burden on the US economy. Currently, this area employs 153 thousand people, compared with 200 thousand four years ago. Tax reform has made Americans more competitive, and active hedging of price risks allows companies to increase investment even in the face of falling black gold. States will benefit from the peak of Brent and WTI. Can not be said about Saudi Arabia and Russia.

The impact of falling oil prices on individual countries

According to Bloomberg Economics, for the effective functioning of the budget, Riyadh requires a North Sea variety at $ 80 a barrel. The Saudis are calling on OPEC to cut production, and they themselves are ready to make a feasible contribution of 500 thousand b / d. A decent figure, but given the fact that Saudi Arabia has increased production to more than 11 million b / d (+1 million b / d since spring), not so big as to return Brent to above $ 70 per barrel. In addition, the country's position is undermined by the murder of a journalist, and in case of excessive activity, Riyadh runs the risk of running into Washington's sanctions. He is forced to act extremely carefully.

The position of Russia is a kind of joker for players in the market of black gold. 45% of the country's budget revenues are linked to oil, but Moscow will be satisfied with $ 40 a barrel in the Urals. It clearly does not want to aggravate relations with Washington, especially in the face of growing geopolitical tensions over the events in the Kerch Strait. Vladimir Putin may try to play the oil card at the G20 meeting in Buenos Aires. Given the presence of Donald Trump and Mohammed Bin Salman there, this event is more important than the OPEC summit in December.

I do not think that the reduction in global production will be so significant as to deploy a "bearish" attack. At the same time, a significant part of the negative has already been taken into account in the quotes, and the completion of the grace period for buyers of Iranian black gold will support the bulls. Thus, the risks of consolidation of Brent grow.

Technically, a 113% achievement of the North Sea variety by the Shark pattern enhances the likelihood of recoil to 23.6%, 38.2% and 50% of the CD wave as part of its transformation into 5-0.

Brent, the daily chart