11.05.202114:17 Forex Analysis & Reviews: Oil is hindered by the pandemic

Cyberattack on the Colonial Pipeline in the United States, which should potentially lead to a shortage of gasoline in the retail network, caused only a short-term spike in oil prices. The black gold market recovered very quickly, especially since the company announced that its activities will be fully restored by the end of the week on May 10-14. Investors perceived the incident as a temporary disruption and are now returning to the topic of global inconsistency in the countries emerging from the COVID-19 and in the states that continue to be in its grip.

It would seem that problems with the delivery of oil from producers to consumers and the weakness of the US dollar should have supported the bulls on Brent and WTI. The US dollar really fell heavily due to disappointing labor market statistics for April, which increased the likelihood of the Fed maintaining ultra-soft monetary policy for a long period of time. At the same time, the ideas of long-term sales of the USD index, prevailing at the end of 2020, are returning to the market. Since black gold is quoted in dollars, the depreciation of the US currency, as a rule, helps its buyers. Unfortunately, this does not happen in May, which, in my opinion, is due to investors' fears about the worsening epidemiological stop in India and other countries.

But oil can boast of such trump cards as consistently high demand from China and growing interest from Europe. According to research by Bloomberg, based on tracking tankers, manufacturers from the United States, Nigeria, and Brazil shipped 1 million barrels per day more black gold to buyers from Europe in April than in March. Shipments from terminals in the Gulf of Mexico have skyrocketed since late April.

Dynamics of European oil imports

China, the EU, and the USA, where the proportion of the population who received at least one dose of vaccines is approaching 80%, are clearly getting out of the pandemic forest. This circumstance, coupled with the fact that shale production in the United States is practically not growing (and in fact until 2020 it generated most of the world's oil production), the US dollar is falling, and OPEC+ continues to control the market situation, should lead to an increase in Brent and WTI quotes. In fact, both major grades of black gold stubbornly refuse to continue the upward campaign, preferring consolidation. What's the problem?

According to Bloomberg research, if rich countries can achieve herd immunity this year, then the poor will take longer. Perhaps the coronavirus will rage in them until 2024, which is a completely different story. The example of India, where the number of infected continues to set new terrible records, is indicative and clearly holding back the oil bulls.

Technically, a decline in Brent below the moving averages could trigger a major correction in the direction of 23.6% of the CD wave of the Shark pattern. Nevertheless, the trend remains upward, and the exit of quotes beyond the upper border of the consolidation range of $64.7-$70 per barrel will allow forming longs with a target of $77.7.

Brent, Daily chart