18.06.201914:39 Forex Analysis & Reviews: Oil remembered about the dollar

Its shirt is closer to the body. According to IMF estimates, Brent is required at $80-85 per barrel in order to balance the budget of Saudi Arabia. Looking at these figures, it becomes clear why Riyadh is calling on OPEC and other producing countries to prolong the Vienna agreement on production cuts by 1.2 million b/s until the end of 2019. According to the Saudis, the factor of escalation of tension in the Persian Gulf cannot compensate for such "bearish" for oil drivers, as a slowdown in global demand and an increase in US shale production to record highs. It seems that the 20% peak of black gold from the levels of April peaks could be the beginning of the end for the bulls. Unless, of course, the cartel and Russia throw a lifebuoy to them.

Speculators are quite sensitive to changes in the market situation of the physical asset and continue to fold long positions. By the end of the week, by June 11, net Brent losses fell by 4% to 292026 contracts and WTI by 29% to 129416 contracts.

Dynamics of speculative positions and oil prices

Theoretically, large-scale supply disruptions in the area of the Strait of Hormuz could trigger the growth of Brent and WTI, but this is still a matter of isolated attacks on tankers. The slowdown in global oil demand due to trade wars and the growth of US production to record highs seem more serious factors to investors than Iran's sabotage activities in the Middle East. It was Tehran that Donald Trump accused of attacking ships carrying black gold.

In the States, the active increase in production and the much-desired demand led to an increase in reserves to multi-year highs. According to estimates by the US Department of Energy, shale oil production in July will reach a record peak.

The situation is aggravated by the uncertainty regarding Russia's readiness to support the extension of the Vienna agreement to cut production by 1.2 million b / s and the return of investor interest in the US dollar. Moscow will suit Brent and at $ 40-45 per barrel. She is well aware that she is losing market share, creating favorable conditions for American manufacturers. Russia will have a difficult decision, but in my opinion, the deeper the oil prices sink, the more likely it is to support the idea of extending the agreement to the end of 2019.

The situation is aggravated by the uncertainty regarding Russia's readiness to support the extension of the Vienna agreement to cut production by 1.2 million b/s and the return of investor interest in the US dollar. Moscow will suit Brent and at $ 40-45 per barrel. She is well aware that she is losing market share, creating favorable conditions for American manufacturers. Russia will have a difficult decision. But in my opinion, the deeper the oil prices sink, the more likely it is to support the idea of extending the agreement to the end of 2019.

The market doubts that the rate based on FOMC forecast will be the same "dovish" as the indications of futures contracts. CME derivatives give out almost 90% probability of two acts of monetary expansion in 2019 and the Central Bank must lower expectations for future values of the federal funds rate in order to align their readings with the Fed's opinion. While retail sales and industrial production are pleasing to the eye, there are serious doubts that he will do it. Investors are returning to the US dollar, which puts pressure on oil.

Technically, the transformation of the Shark pattern in 5-0 continues on the daily chart of Brent. The further fate of black gold depends on what kind of consolidation range of $59.5-63.9 per barrel will be taken by storm.

Brent daily chart