14.11.201801:39 Forex Analysis & Reviews: Oil ignores OPEC

Brent and WTI marked the longest losing period in three decades, losing more than 20% of the October highs. This figure is considered to be an indicator of a change in the trend. Oil officially entered the territory of the "bears", and even loud statements of Saudi Arabia to reduce OPEC production by 1 million b/d did not revive the "bulls". Russia shows little concern over the reduction, explaining it by temporary factors, and the President of the United States advises Riyadh not to make any sudden movements.

At a meeting in Abu Dhabi, representatives of the cartel expressed their dissatisfaction with the policy of Donald Trump, who urged them to increase production, and he used economic sanctions against Iran. In response, OPEC decided to change its position and increase oil production by 1 million b/d, half of the obligations assumed by Saudi Arabia. Riyadh noted that in December, the demand for black gold supplied from its territory is declining, while the country has no plans to increase its reserves. The angry response from the White House host to the news from the United Arab Emirates: "Let's hope Saudi Arabia will not cut oil production. Prices should be significantly lower than current prices. They are set taking into account the dynamics of the proposal." After the defeat of Republicans in the House of Representatives, the president needs measures that support high economic growth in the United States, and the lower Brent and WTI are quoted, the better for consumer spending and GDP.

Unlike Riyadh, Moscow does not see the need to reduce the production of black gold and, on the contrary, in accordance with Reuters sources, is ready to increase its own figure by 300,000 b/d. It was the growth in production in the three countries - the largest producers - that became one of the key drivers of the peak of Brent and WTI in October-November. Hedge funds in the last six weeks have approximately halved net long positions in both grades of oil. Their value is the third part of the peak in January.

Dynamics of speculative positions on oil

Along with the increased activity of the largest producers, support for the "bears" on oil is provided by the eighth week of US reserves growth (according to Bloomberg experts, by the end of the five-day period by November 9, they will increase by 3.09 million barrels), a grace period introduced by the United States for buyers of Iranian oil and rumors of a slowdown in global demand under the influence of trade wars. The black gold market is extremely emotional, and talk about its transition from a deficit to a surplus seriously frightened speculators.

Not the last role in the peak of Brent and WTI is played by a confidently feeling American dollar. Neither the British pound and the euro, which are burdened with political problems, nor the Japanese yen, which is experiencing serious difficulties due to the improvement of the global appetite for risk, are able to compete with it.

Technically, the daily chart of Brent continues to implement the target of 88.6% on the "Shark" pattern.

Brent, daily chart