03.04.201915:53 Forex Analysis & Reviews: The growth of oil can only cancel force majeure

The dynamics of oil is optimistic and prices are convincingly going up. The American WTI is trading above $60 a barrel and Brent is close to $70 a barrel. Hedge funds and other financial managers have increased their long positions in black gold. Net long for six major contracts was increased by 37 million barrels for the week of March 26. It is noted that the expansion of pure long on WIT and Brent was due rather to the growth of adding new long positions rather than closing short ones.

Hedge funds have stepped up to open a buy position after a pause in March for a number of reasons.

A period of relaxation for 8 importers of Iranian oil is coming to an end and therefore, market participants are worried that America will not extend the exemptions for these countries. An argument for the growth of oil was the first estimates of a new decline in production by OPEC + members in March. Both planned reductions and extraordinary circumstances have played their part.

By the end of March, Russia reduced production by 0.18 Mb/d, which is lower than the promised figure. At the same time, many OPEC + countries have exceeded their obligations. It is curious how much Venezuela has reduced. Preliminary data showed that average production was just under 1 Mb/d. Equally interesting is the similar information from Saudi Arabia set the tone for OPEC+ and showed maximum production cuts compared to the end of last year, which in connection with the upcoming IPO.

Information about the largest Ghawar oil field in the world in Saudi Arabia became an unexpected engine of price growth. Bloomberg reported, the production here is a maximum of 3.8 Mb/d, which is far below market expectations and previously announced by Saudi Aramco itself. Previously, it was about 5 Mb/d and EIA completely estimated production at Gavar at 5.8 Mb/d. It turns out that now the largest oil whale is inferior in performance to American fields Permian. After a serious deterioration in production rates, oil market traders will be concerned with some caution about the estimates that the country can easily increase production to 12 Mb/d, in principle. Meanwhile, the Saudis have something to brag about except for Ghawar.

Oil is supported by optimistic data on the industrial sector of China, as well as the declared progress in trade negotiations between the US and China.

Oil surveys have reached a strong technical resistance and can slow down for a while so that the big players can regroup their positions. In general, interest in shopping now can only cancel the major force.