09.11.202116:15 Forex Analysis & Reviews: U.S. hints on selling oil from strategic reserves do not scare Brent bulls

The more Joe Biden throws arrows of criticism at OPEC+, which does not want to intensify oil production and thus impede the recovery of the world economy, the more often investors ask themselves: well, what about? Indeed, the United States is an oil-producing country that could open more taps, but prefers not to do this, but threatens to sell oil from strategic reserves. This circumstance prevents the return of Brent and WTI to the area of 7-year highs. However, the bulls have other trump cards.

It is difficult to assess the impact of oil sales from the U.S. strategic reserves. It's all about the scale. Market disappointment with volumes could drive up prices even further. The U.S. does not need to act alone and win over to their side both other IEA members and countries that are not part of the authoritative organization. This is primarily about China. In the meantime, the threat of the White House with a sword of Damocles hung in its head is cooling the ardor of buyers of the North Sea and Texas varieties. The Americans are waiting for the report of the International Energy Agency, and along with them, the whole black gold market is waiting for this information.

What prevents the United States from increasing production on its own? The government predicts that the figure will increase to 11.7 million b/d in 2022, which is lower than the 13 million b/d that occurred before the pandemic.

Dynamics of American oil production

The answer must be sought in the policy of manufacturing companies, which prefer to spend money, not on the development of new fields, but the payment of dividends to shareholders. As a result, the responsibility for ensuring that production catches up with global demand that has gone significantly ahead falls on the shoulders of OPEC+, and the countries that make up the Alliance are in no hurry to make adjustments to their obligations. They are well aware that their passivity in the face of a rapid recovery in demand for oil (according to JP Morgan, it has almost returned to its previous level of 100 million b/d, which took place before the pandemic) leads to a favorable price increase for local budgets. Even their current high values do not prevent Saudi Arabia from raising premiums on its oil for Asian clients by the maximum value over the past 10 years.

While Joe Biden is outraged by the rise in oil prices and the passivity of OPEC+, Brent and WTI continue to receive good news from the U.S. Allowing vaccinated tourists to visit the United States should increase demand for aviation fuel, and the House's passage of the $ 550 billion infrastructure bill is a bullish factor for the North Sea and Texas varieties, according to Bloomberg experts. Let's not forget about the slow normalization of the Fed's monetary policy, which contributes to the correction of dollar pairs and creates preconditions for the purchase of commodity market assets, including oil.

Technically, the inability of Brent bears to gain a foothold below the trend line of the Splash stage of the Splash and Shelf pattern is a sign of their weakness and the basis for the formation of long positions with targets at $89.7 and $92.6 per barrel.

Brent, Daily chart