20.02.201814:30 Forex Analysis & Reviews: Brent pulls the rope on himself

After a long 7-month rally, the oil market again took up the old one. For tug of war. On one side are the American producers of black gold, for which the current prices provide an excellent opportunity to increase the production volumes. In February, it jumped to a record of 10.27 million b / s and, most likely, will continue to grow further. This is evidenced by an increase in the number of drilling rigs from Baker Hughes for the fourth consecutive week. During this period, the indicator added 55 pieces and reached the level of 798. It would seem that it's time for the bulls to throw out a white flag. But it was not there.

If you and the enemy pull the rope each to your side, then for certain there is some kind of equilibrium point, near which it will be most often. The market is actively discussing the level of $ 60 per barrel by WTI, which allegedly will satisfy both the buyers and the sellers. Of course, each of these categories of participants in the market battles would like to see progress on their side, however, only one desire in the market, as a rule, is very small. So, competent sources Bloomberg say that at present, Saudi Arabia will arrange Brent for $ 70 per barrel, here its ministers and declare that the cooperation between OPEC and Russia will extend beyond 2018. Say, the framework of the new agreement will be outlined in the summer. If we add to this the cartel's statement about 133% fulfillment of its obligations by the member countries of the Vienna agreement in January, the oil will have a rather strong bullish driver.

Dynamics of WTI and OPEC oil production

Source: Bloomberg.

Taking into account the fact that a group of states reduces production, and the States increase it, the movement of the rope in one direction or another will be determined by the dynamics of global demand. According to OPEC research, the indicator in 2018 will increase by 1.6 million b / s, and its dynamics are closely linked to the state of health of the world economy. In this connection, it becomes clear why black gold grows against the background of an upward trend in the stock indices and falls in response to the correction of the S & P500. States with their strong domestic demand and a large fiscal stimulus are a kind of locomotive of global GDP, and their share market is a thermometer that allows us to determine the state of our own economy.

At least as important for the medium and long-term prospects, Brent and WTI have US dollar positions. The risks of overheating of US GDP on the background of accelerated inflation and aggressive monetary restriction of the Fed force investors to actively sell the USD index, which is a "bullish" factor for oil. Ultimately, the asset expressed in dollar terms in the event of a depreciation of the latter will be cheaper in the countries that are the largest consumers. For example, in China.

Technically, after reaching a target of 88.6% on the pattern of the "Shark", the rollback looks natural. To restore the uptrend, bulls require successful resistance assaults at $ 69.25 and $ 70.25 per barrel. On the contrary, a retreat from the levels of 50% and 61.8% of the CD wave will increase the risks of correction development.

Brent, daily chart