Crude Oil Updates by Solid ECN

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Brent Crude Oil prices show moderate growth, developing a strong "bullish" momentum formed last week and updating local highs from March 24. At the moment, the instrument is testing the level of 118.9.

Representatives of the EU countries, after lengthy negotiations, agreed on the sixth package of sanctions, which, among other things, includes a partial embargo on the supply of Russian oil, and also prohibits operations related to insurance of the delivery of energy from the Russian Federation to third countries. Earlier Hungarian officials opposed a complete ban on energy imports, comparing it with dropping a nuclear bomb on their economy, and Prime Minister Viktor Orban said that he would support anti-Russian sanctions only after providing guarantees on alternative fuel supplies. In the end, EU leaders still managed to reach an agreement on a partial ban that would not affect Hungary. The restrictions will affect the purchase of "black gold" supplied by sea, but will allow a number of countries to use the existing infrastructure, in particular, the Druzhba oil pipeline, through which deliveries to Germany and Hungary are possible.

The rise in prices for oil and oil products is also facilitated by the beginning of the automobile season in the US, where record prices for gasoline are fixed. The decision of the Chinese authorities also has a positive effect on the quotes: from June 1, the work of enterprises in Shanghai is resumed, and a number of restrictions on the operation of public transport and retail outlets are lifted in Beijing.

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Bollinger Bands in D1 chart show moderate growth. The price range is expanding, but it fails to catch the development of "bullish" trend at the moment. MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). Stochastic has approached its highs, indicating the risks of overbought instrument in the ultra-short term.

Resistance levels: 120, 122.60, 125.85 | Support levels: 118, 115.5, 114.09, 112

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SOLIDECN

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The North American WTI Crude Oil price is correcting in an uptrend around 114.78.

The Wall Street Journal published an article stating the intention of some members of the Organization of the Petroleum Exporting Countries to work out a plan to exclude Russia from the OPEC+ deal. According to experts, Western sanctions and a ban on the import of energy resources by the EU countries will lead to the fact that the production of Russian "black gold" will be reduced by 8% in 2022, and the country will not be able to support the cartel's plan to increase production. However, investors and many analysts have already questioned the reliability of this information since a few days earlier, Saudi Energy Minister Salman bin Abdul-Aziz announced the creation of a draft new OPEC+ agreement, which would include Russia. According to the official, the organization intends to increase production if the oil demand is sufficient. He also stressed that there was no place for politics in an agreement on which the energy stability of the whole world depends.

As for the current demand for oil contracts from investors, according to data from the US Commodity Futures Trading Commission (CFTC), the number of net speculative positions in the asset over the past week increased to 334.8K from 325.6K, which confirms the stable interest of traders for the seventh week in a row.

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The price continues to work out a stable buy signal after overcoming the upper border of the Triangle pattern. At the moment, indicator Alligator's EMA oscillation range is actively expanding upwards, and the histogram of the AO oscillator is trading high in the buying zone, forming rising bars.

Resistance levels: 115.85, 123.8 | Support levels: 111.77, 98.24​
 

SOLIDECN

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Last Tuesday, May 31, the leaders of the countries of the European Union agreed on the sixth package of economic sanctions, which included an embargo on the import of two-thirds of Russian "black gold". Against this backdrop, Brent Crude Oil quotes reached new highs around 122.

The new restrictive measures include a ban on the import of energy resources transported by sea, but do not affect supplies to Hungary through the Druzhba pipeline. Officials also said that by the end of the year they would refuse 90% of Russian oil imports, in exchange for which the EU plans to purchase energy carriers in Asia and Arab countries, as well as in the United States, but it will take time to adjust to new logistics. Due to the artificially limited supply on the black gold market and the growing demand for raw materials in Europe, Brent Crude Oil quotes showed a rapid increase and stopped at around 122.00 this week, updating the high of March 24.

Now the trading instrument is correcting in anticipation of the OPEC+ meeting, which will discuss the possibility of adjusting the production of "black gold" against the backdrop of the continuation of a special military operation in Eastern Europe, initiated by the Russian authorities, as well as its consequences for the energy market. Participants are expected to continue to adhere to the current 432K barrels per day production recovery plan, despite the EU authorities' decision.

Meanwhile, Saudi Arabia is ready to increase the production of "black gold" if it suddenly needs to compensate for the falling volumes from the Russian side. In turn, the United States offered Saudi Arabia to increase energy supplies to the EU and exclude Russia from the OPEC+ deal in exchange for unblocking arms supplies, but official Riyadh did not agree to take this step.

Summing up, one can conclude that if the increase in the rate of oil production by OPEC+ countries occurs according to a pre-approved plan, then prices will continue to rise in the future due to increased demand and insufficient supply. However, if a decision is made on an emergency adjustment in order to replace volumes of Russian oil, the instrument may head towards 100 in the long term.

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The long-term trend is upward. After updating the March 24 high, the price decreases and approaches the support level of 114.50, and if it is held by the "bulls", the growth will continue with the target at the May high. Otherwise, the correction will continue to the level of 107.15. The medium-term trend is upward. This week the target zone 2 (118.57–117.67) was broken out, and the next target is in the area of 127.57–126.67. Now the price is correcting and approaching the key trend support at 114.31–113.41, after reaching which new purchases can be considered with the first target at the high of the current week.

Resistance levels: 122, 129, 135 | Support levels: 114.5, 107.15, 101.9

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SOLIDECN

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On the daily chart, the upward wave C develops, within which the first wave 1 of (1) of C has formed. Now, a downward correction is developing as the second wave 2 of (1) of C, within which the wave of the lower level a of 2 has formed, and the development of the wave b of 2 is ending.

If the assumption is correct, the price will fall to the levels of 77.08 - 62.5. In this scenario, critical stop loss level is 139.53.

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SOLIDECN

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On the daily chart, the development of the first wave of the higher level 1 of (1) of C ended, and a downward correction develops as the second wave 2 of (1) of C. Now, the wave of the lower level a of 2 is developing, within which the wave (i) of a has formed, and the correctional wave (ii) of a is ending.

If the assumption is correct, after the end of the correction, the price will fall within the wave (iii) of a to the levels of 82.30–67. In this scenario, critical stop loss level is 131.17.

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SOLIDECN

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Trading near local highs​

During the Asian session, Crude Oil prices show flat dynamics, trading near the level of 118.5 and holding close to local highs from March 9.

The instrument is supported by an increase in energy demand with the beginning of the summer season in the US. Also, investors fear that a new EU sanctions package against the Russian economy, which includes a partial embargo on the supply of "black gold," may provoke a supply crisis in the market. Demand for hydrocarbons is also rising in China, where quarantine restrictions were eased in early June, and enterprises in Shanghai resumed their work.

Investors continue to evaluate the decision of OPEC+ members to increase production volumes to compensate for existing losses in supply chains after the introduction of anti-Russian sanctions against the background of the military conflict in Ukraine. Thus, in July, production will increase to 648K barrels per day instead of 432К barrels per day predicted by analysts, which is 0.7% of world demand. Market experts believe that the unpredictable decision of the cartel members is unlikely to significantly affect the dynamics of the instrument since, even now, the largest producers, excluding Saudi Arabia and the United Arab Emirates, are working at their limit.

On Tuesday, the quotes were under pressure from the American Petroleum Institute (API) report on oil stocks in the country. For the week of June 3, the indicator increased by 1.845M barrels after falling by 1.181M barrels in the previous period. On Wednesday, traders are waiting for the publication of the final report on oil reserves from the Energy Information Administration of the US Department of Energy (EIA).

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On the daily chart, Bollinger bands are growing moderately: the price range remains practically unchanged; however, it lets the "bulls" renew local highs. The MACD indicator grows, keeping a poor buy signal (the histogram is above the signal line). Having reached its highs, Stochastic reversed into a horizontal plane, indicating that the instrument may become overbought in the ultra-short term.

Resistance levels: 119.1, 121, 123.30, 125 | Support levels: 115.79, 113.13, 110, 107.67

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SOLIDECN

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Brent Crude Oil prices are holding near a 13-week high after China reported higher-than-expected exports in May, but new lockdown restrictions in Shanghai are holding back a faster gain.

For example, China's exports for May increased by 16.9% compared to last year, as the easing of restrictions related to the COVID-19 epidemic allowed some factories to restart. It was the fastest rise since January this year and more than doubled analysts' expectations of 8.0%. Imports also rose by 4.1% YoY, doubling the forecast of 2.0%. New social restrictions have been introduced in some areas of Shanghai. So, in Minhang, where about 2M people live, authorities asked residents to stay at home for two days to control the spread of the virus. At the moment, operational measures are being taken to avoid crowds and testing in places where cases of infection are recorded.

Meanwhile, in the US, there is an increase in commercial oil inventories, which casts doubt on further price increases. According to the Energy Information Administration of the US Department of Energy (EIA), the figure rose by 2.025M barrels, despite the forecast for their decline by 1.917M. According to the World Bank report, oil prices added 350% in two years alone, showing a record increase in two years period since 1973. The upward dynamics continue against the background of the escalation of the military conflict in Ukraine. Experts predicted that quotes would add up to 42% compared to the same period last year but already in 2023, the dynamics will correct, and there will be a decline of 8%, and in 2024 – by 13%.

Thus, we can conclude that if restrictions in China regarding COVID-19 weaken and the demand for gasoline and petroleum products grows due to the summer season, oil prices will continue to strengthen with an immediate target of 129.

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The long-term trend is upwards. This week, the price consolidated above 120, and the next target is 129, the breakout of which will allow the instrument to reach the area of 135. The key trend support is at 115.20. The RSI indicator is approaching the overbought zone, but it still allows considering trades along with the current trend.

The medium-term trend is upwards. After the breakdown of the target zone 2 (118.57–117.67) last week, the growth target was zone 3 (127.57–126.67). Long positions may be opened on the correction from the key trend support 117.14–116.24.

Resistance levels: 129, 135 | Support levels: 122, 115.2

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SOLIDECN

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OPEC's ability to increase production has been exhausted.​

Yesterday, OPEC Secretary General Mohammed Barkindo said that the cartel was running out of opportunities to increase the production of "black gold." According to the official, the production capacities of the participating countries, except for two or three states, are at their peak, and in this situation, there are practically no opportunities to influence the rise in prices. Barkindo added that the market could expect even more turmoil as China recovers from a new wave of the coronavirus pandemic and boosts demand significantly. He also called for increased investment in the oil and gas sector, although the US authorities have previously called for a stop to financing fossil fuels, switching to renewable energy.

During the hearings of the US Committee on Foreign Affairs, US State Department Senior Energy Security Adviser Amos Hochstein expressed concern that India had increased its purchases of Russian oil from 100K barrels per day to 800K and urged official New Delhi to curb this trend, despite strong dependence on supplies. One of the main reasons for the observed dynamics is a significant discount for the Urals brand relative to the oil price for Brent Crude Oil. According to the official, if the country refuses to import resources from the Russian Federation, then there will be no other buyer for them, so these purchases will not look like a blow to European and American consumers who have already refused to cooperate with the Russian authorities under the sixth economic package sanctions.

Thus, there are almost no factors that can put pressure on the asset's quotes on the market now, in connection with which many experts spoke about the possibility of oil prices rising to 150 dollars or more by the end of 2022.

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After the breakout of the upper border of the Triangle pattern, the price works out a signal to open long positions. At the moment, indicator Alligator's EMA oscillation range is actively expanding upwards, and the histogram of the AO oscillator is forming rising bars high in the buying zone.

Resistance levels: 122.2, 130 | Support levels: 113.8, 97.5​
 

SOLIDECN

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Crude Oil, decline on expectations of the "hawkish" rhetoric of the US Federal Reserve​

Previously, experts predicted that the US regulator would raise rates by 50 basis points at a meeting on Wednesday, but after the release of strong data on the consumer price index for May last Friday, more investors expect a change of 75 basis points, which puts pressure on stock positions and oil. Last month, the inflation in the US accelerated from 0.3% to 1.0%, which exceeded the average market forecasts of 0.7%. The value has renewed 40-year highs, reaching a new peak at 8.6% YoY, while in April, the growth was 8.3%.

Additional pressure on the oil quotes is exerted by reports that the chairman of the US Senate Finance Committee, Ron Wyden, plans to pass a law establishing a 21% income tax on excess profits of oil and gas companies with an annual income of more than 1B dollars, which analysts perceive as excessive in these conditions.

From an even stronger fall, the trading instrument is kept by reports that Libya has almost completely stopped oil production due to the political crisis in the east of the country. Market losses are estimated at 1.1M barrels per day, although last month's production averaged 1.2M barrels per day. Libyan Oil Minister Mohammed Aoun said that almost all fields are currently closed. In turn, the limitation of oil production leads to a lack of supply, which, against the backdrop of high demand, does not allow prices for Brent Crude Oil to fall below 120.

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The long-term trend is upwards. In early June, the support level of 120 was broken, around which the price is now correcting, and long positions with the target of around 129 may be opened here. The medium-term trend is with the target in zone 3 (127.57–126.67). Now the price is heading for a correction towards the area of the trend's key support at 117.63–116.76, after reaching which, long positions with the first target at the current week's high at 126.20 may be opened.

Resistance levels: 129, 135 | Support levels: 121, 115.2, 107.15

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SOLIDECN

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Crude Oil - The price may fall.​

If the assumption is correct, the price will fall to the levels of 82.3 – 67. In this scenario, critical stop loss level is 123.8.

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SOLIDECN

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Crude Oil - prices retreated to new local lows​

The trading instrument is under pressure from the rhetoric of US Federal Reserve Chairman Jerome Powell, who, during a speech in the Senate Committee on Banking, Housing and Urban Affairs, announced the continuation of the "hawkish" course of the regulator regarding the adjustment of interest rates to combat record inflation. At the same time, experts are worried that too sharp tightening could provoke a recession in the national economy. In June, the department decided to raise the rate by 75 basis points, and now analysts are trying to predict how the rate will change during the July meeting. A similar situation is developing in other countries: thus, this month, the Bank of England raised the rate for the fifth time.

Cecilia Rose, chairman of the council of advisers to the head of the White House on economics, noted that the decline in prices for "black gold" could be triggered by increased supplies of Russian energy resources to China and India against the backdrop of the discount policy he presented. In particular, China increased imports by 55% YoY, about 2M barrels per day.

The dynamics of the asset slowed down after the publication of data on stocks of raw materials in the US. Thus, the report released on Wednesday from the American Petroleum Institute (API) reflected a sharp increase in the index for the week of June 17 by 5.607M barrels after an increase of 0.736M barrels over the previous period. The final statistics from the Energy Information Administration of the US Department of Energy (EIA) have not yet been released due to technical problems.

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On the daily chart, Bollinger Bands are steadily declining: the price range is expanding, letting the "bears" renew local lows. MACD falls, keeping a fairly strong sell signal (the histogram is below the signal line). Stochastic reverses into a horizontal plane near 20, signaling that the instrument may become oversold in the ultra-short term.

Resistance levels: 105, 107.67, 110, 113.13 | Support levels: 103, 101.09, 100, 98

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SOLIDECN

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Brent Crude Oil - G7 prepares to set cap prices for Russian oil​

Yesterday, the quotes showed a moderate increase, caused by the experts' fears of a reduction in the supply of raw materials to the market. In particular, it is expected that new restrictions may be introduced following the results of the summit of the leaders of the G7 countries in the Bavarian Alps, where the issue of the marginal cost of Russian "black gold" is currently being discussed. The initiative, which involves determining the maximum price of the energy resource directly from the buyer, was introduced by US officials, who note that this will significantly reduce the revenues of the Russian budget against the backdrop of reduced supplies. While the final decision has not been made, it is reported that the negotiations are being conducted "constructively." In turn, the French authorities called on Iran and Venezuela to increase their oil production to start correcting prices on the market. Among other measures, new bans on gold imports are expected, as well as a possible expansion of the oil embargo. Macroeconomic indicators in countries dependent on energy supplies are showing the first signs of a slowdown, which is only partly due to the price itself, as the fall in supply has so far been offset by a decrease in demand.

Traders fear a recession in several of the world's leading economies, including the United States, where inflation remains at record highs despite the active actions of the American regulator, and too rapid interest rate growth negatively affects the well-being of households accustomed to extremely low costs borrowings.

The focus of investors on Tuesday, also with speeches by representatives of the European Central Bank (ECB), is a report from the American Petroleum Institute (API) on oil inventories for the week of June 24. Previous statistics showed an unexpectedly high increase of 5.607M barrels.

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On the daily chart, Bollinger Bands are moderately declining: the price range is actively narrowing, reflecting the ambiguous nature of trading that has developed in the short term. The MACD indicator is growing, forming a new buy signal (the histogram is above the signal line). Stochastic is showing more confident growth, but it is rapidly approaching its highs, indicating that the instrument may become overbought in the ultra-short term.

Resistance levels: 112, 114.09, 116, 120 | Support levels: 109, 106, 102.57, 100

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SOLIDECN

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Crude Oil - the oil market is correcting after the collapse​

After a significant decline last week, the trading instrument moved to an upward correction caused by statements by the state oil company of Saudi Arabia, Saudi Arabian Oil Company, that a supply crisis does not threaten the oil market, as it has an additional production capacity of 1.5M barrels per day, which can be used if necessary. Although this level cannot be maintained for long, it will be enough to compensate for the lack of oil while other members of OPEC+ increase their production. Confidence that Saudi Arabia has these opportunities is added by the announced goals of the Saudi Arabian Oil Company to increase production from 12M barrels to 13M per day by 2027. Also, the US authorities are actively trying to negotiate with Asian countries on setting marginal prices for Russian oil around 40–60 dollars per barrel. Moscow has already stated that it will not trade energy resources in such conditions. If this happens, then, according to experts, oil prices will be able to exceed 300 dollars per barrel.

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On the global chart, the trading instrument is moving below the global support line, limiting the possibility of long-term growth. Technical indicators maintain an increasing sell signal: fast EMAs of the Alligator indicator are moving away from the signal line, and the AO oscillator histogram is forming downward bars in the sell zone.

Resistance levels: 108.22, 113.66 | Support levels: 98.57, 92.4​
 

SOLIDECN

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Crude Oil - a sharp increase in production from OPEC+ is not expected​

Short-term support for prices is provided by the results of the visit of US President Joe Biden to Saudi Arabia. Investors expected that the head of the White House would be able to agree with the world's leading exporter on a serious increase in the production of "black gold", if not immediately, then in the near future, but this did not happen, so an aggressive increase in production by the countries participating in the OPEC+ deal should not be expected yet. The cartel is likely to maintain the current monthly pace of 648K barrels per day.

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At the moment, the price is close to the level of 107.9 (Fibo retracement 38.2%, the middle line of the Bollinger Bands), consolidation above which will allow the instrument to strengthen to the level of 112.5 (Murray [4/8]), 117 (Fibo retracement 23.6%). The key for the "bears" is seen at 103.12 (Murray [1/8]), with a breakdown of which a decline to the area of 100 (Murray [0/8], Fibo retracement 50.0%) and 96.88 (Murray [-1/8]) is likely.

Technical indicators do not give a single signal: the Bollinger Bands are directed downwards, the MACD histogram is stable in the negative zone, and the Stochastic has reversed upwards.

Resistance levels: 107.9, 112.5, 117 | Support levels: 103.12, 100, 96.88​
 

SOLIDECN

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Crude Oil - lower demand for gasoline in the USA puts pressure on quotes

Earlier, data from the Energy Information Administration of the US Department of Energy (EIA) were published, which put pressure on the positions of the trading instrument. In particular, oil reserves decreased by 0.446M barrels, and distillates — by 1.296M barrels, while gasoline reserves in the USA immediately increased by 3.498M barrels, which worries investors, since such a rapid drop in gasoline demand during the summer car season can mean serious problems in the national economy. Probably, the population cannot pay for fuel at the new high tariffs, which threatens to further reduce its sales. An additional factor of pressure on prices is the resumption of production at a number of fields in Libya, where a regime of force majeure was previously announced.

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Now the trading instrument is testing the mark of 103.12 (Murray [1/8]), consolidation below which will allow the quotes to continue moving to the area of 100 (Murray [0/8], Fibo retracement 50.0%) and 96.88 (Murray [-1/8]). The key for the "bulls" is still the level of 108, the breakout of which will be a catalyst for growth to the levels of 112.5 (Murray [4/8]), 115.62 (Murray [5/8]).

Technical indicators signal the continuation of the decline: the Bollinger Bands are directed downwards, the Stochastic is reversing downwards in the overbought zone, and the MACD histogram is stable in the negative zone.

Resistance levels: 108, 112.50, 115.62 | Support levels: 103.12, 100.00, 96.88​
 

SOLIDECN

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Crude Oil - Growth against the backdrop of increased oil demand​


This week, Brent Crude Oil prices have resumed their upward trend and are now trading around 106.8. Strengthening the positions of the trading instrument is facilitated by several main factors: a decrease in the volume of gas supplies from Russia to the EU countries, a decrease in stocks of petroleum products in the United States, and the decision of the American financial authorities on the interest rate.

So, this week Gazprom concern reduced the gas supply to the EU countries for repair work on one of the gas pipeline turbines. Now Nord Stream, the main artery for transporting fuel, is loaded with only 20% of its nominal capacity, threatening European consumers with serious problems during the heating period. To avoid critical consequences from the complete cessation of supplies, European countries have decided to switch to reducing gas consumption and reorienting industrial facilities to other types of fuel, in particular oil, which is already affecting the energy demand.

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The oil price rose above the middle line of Bollinger bands and is close to 108. If it is broken, the upward trend could continue to the area of 112.4 and 117. The return of quotes to 103.12 allows a decline to 100 and 95.5.

Resistance levels: 108, 112.5, 117 | Support levels: 103.12, 100, 95.5​