07.04.202013:16 Forex Analysis & Reviews: Oil pull the chestnuts out of the fire

Donald Trump is not interested in the problems of Saudi Arabia with the budget or the slide of the Russian economy into recession. The US President is more concerned about the difficult situation in which the American producers of black gold fell on the background of the fall in Brent and WTI quotes to the 18-year bottom. The S&P 500 index of energy companies declined by 51% in January-March, which is the most serious quarterly collapse in its history since 1989. The United states are facing a wave of defaults and bankruptcies, which is clearly not part of the White House's plans. However, he prefers to solve internal problems with someone else's hands.

Russia and Saudi Arabia, from which Donald Trump demands a reduction in production by 10-15 million b/d, will most likely be pulling chestnuts from the fire for the United States. At an extraordinary emergency OPEC+ summit, issues of the cut will be discussed, but it is obvious that the above figures will not save the market. The participation of the United States, Canada, Brazil, Norway, and Britain is required, as well as an increase in the activity of the largest buyers of black gold. Indeed, what is 10-15 million b/d if the oil market surplus is estimated at 25-35 million b/d?

Dynamics of oil production by Russia and Saudi Arabia

Donald Trump also understands that it is impossible to do without the participation of the United States in stabilizing the black gold market. Initially, he did not see the possibility of reducing production in the States, since this is contrary to antitrust laws; then he began to talk that at current prices, reducing American production is an automatic process. The other day, the owner of the White House said that no one has asked him to intervene yet. If they ask, we'll think about it. The US President can solve his own problems at someone else's expense! Washington's trade war with Beijing could convince of this.

Thus, the rise of Brent above $30 per barrel is due to hopes that OPEC+ at the summit on April 9 will report a reduction in production, and the G20 countries will support the cartel the next day. Such rumors cause speculators to fix profits on short positions on Brent and WTI. By the end of the last four weeks, by March 31, they had reduced the net longs for the Texas variety by 80%, which led to its sagging to the lowest levels since 2002.

How can the meetings of OPEC+ and G20 countries end? Disappointment over insufficient production cuts will result in a drop in oil prices with a high risk of restoring the downward trend, so in this scenario, investors should fix profits on long positions for Brent formed on the breakout of the resistance at $28 per barrel in accordance with previous recommendations. On the contrary, a cut of 20-25 million b/d is fraught with a continuation of the correction to the "bearish" trend, which implies holding and building up longs.

Technically, after reaching the target of 200% on the AB=CD pattern, there was a natural pullback to the area of dynamic resistance in the form of moving averages and a correction level of 23.6% on Fibonacci from the last descending wave. Only if they are overcome, the Brent bulls will be able to develop a pullback.

Brent, the daily chart