22.01.201913:31 Forex Analysis & Reviews: Brent pulled off the bat

After losing 40% of its value at the end of 2018, oil managed to be noted as the best start in the last 18 years, quickly flying up to an 8-week maximum amid a reduction in deliveries by OPEC and other producing countries by 1.2 million b / d ending the US and Celestial trade wars and reducing the number of rigs from Baker Hughes in the United States to 8 months bottom at 852. The potential for increasing US production from current record levels looks limited, while a gradual improvement in global demand can push Brent and WTI into higher. But the "bulls" in the arsenal have such trump cards as geopolitics and the weakness of the US dollar.

According to OPEC forecasts, the extraction of black gold outside the cartel in 2019 will grow by 2.1 million b / d, on average to 64.2 million b / d. World oil demand will increase by 1.3 million b / d, to 101 million b / d. Thus, the current cut will be quite enough to balance the market. The problem is one. As events of 2018 have shown, the rise in prices for the North Sea variety above $ 65 per barrel leads to a significant increase in shale production in the States. This mark is critical and the bulls are in no hurry to build up long positions. The increase in net-longs is mainly due to the reduction of short.

There are questions to global demand. In December, China rewrote a record of oil imports (more than 10 million b / s), but the first drop in car sales by 2.8% y / y over the past two decades, real estate market problems (construction is a key consumer of diesel in China) and pessimistic forecasts for oil products (according to China National Petroleum estimates, interest in diesel fuel for the first time since 1990 will decrease by 1.1% in 2019) suggests a slowdown in the indicator.

Dynamics of Chinese foreign trade in oil and oil products

Not add optimism to fans of black gold, the second in the past six months, the reduction of forecasts for the global economy by the IMF and the least rapid growth in China's GDP over the past three decades. According to the International Monetary Fund, we expect a slowdown to 3.5%, the main contribution to which will be made by developed countries. The growth rates of their economies will decline from 2.3% to 2% in 2019 and to 1.7% in 2020.

On the side of the "bulls" by Brent and WTI are playing geopolitics and the potential weakening of the US dollar. Despite some stabilization of the situation in Iran, Libya, Nigeria, and Venezuela, these countries are able at any time to remind themselves of a reduction in production and (or) exports. The "American" does not yet feel the consequences of a pause in the process of normalizing the Fed's monetary policy due to the weakness of the competing currencies. In particular, the euro can not come because of Brexit and a portion of disappointing statistics on industrial production, business activity, and inflation.

Technically, on the daily chart of Brent, the transformation of the Shark pattern in 5-0 continues. Within its framework, a correction takes place in the direction of 38.2% and 50% of the CD wave. The rebound from these resistance levels is usually used for sales.

Brent, the daily chart