Brent: excess supply of oil in the world _12/09/2016

Trading recommendations

Sell ​​in the market. Stop-Loss 48.10. Take-Profit 46.20, 45.65, 43.65, 41.70, 41.00

Buy Stop 48.25. Stop-Loss 47.80. Take-Profit 50.00, 50.70, 51.00


Technical analysis

The price of Brent crude broke through the support levels are 47.60 (EMA200 on 4-hour chart), 47.45 (EMA50 daily chart). Baker Hughes US oil service companies report an increase in the number of active oil rigs in the last week (7 units of 414 units), as well as comments from the Fed's Rosengren about the need to increase interest rates in the United States contributed to a sharp decline in oil prices on Friday.

However, the price remains in the ascending channel on the 4-hour, daily, weekly charts, above the key support level of 46.20 (Fibonacci level of 50.0% correction to decrease with the level of 65.30 to lows in 2016 near the mark of 27.05, and the line moving averages EMA200, EMA144 on the daily chart).

OsMA and Stochastic indicators at different time periods (4-hour, daily, weekly), indicate nevertheless on short positions.

The first "line of defense" defenders Long position "bulls" - the level of support 47.60 - broken. In the event of a confirmed break 47.10 level (the lower line of the rising channel on 4-hour chart), the immediate goal of reducing the level of 46.20 could be. In the case of breakdown the price will return to the downward trend that began in June. The latest "borders" Constraining the fall in oil prices, then become support levels are 43.65, 41.70 (38.2% Fibonacci level and the lows of July / August).

Fundamental background creates the preconditions for the development of just such a scenario. Expectations of a positive outcome of the OPEC meeting in September in Algeria concerning the freezing current levels of oil production in the world can not be justified. Offer the oil in the world, which also contributes to increase the number of active drilling rigs in the United States is increasing, remaining redundant.

Alternative Scenario - an increase to levels near the annual highs marks 50.70, 52.80 - can be realized in the case of coincidence of two factors - reaching agreement on the freezing of oil production in the OPEC meeting and the Fed's decision to refrain from raising rates in the US at the meeting of the Fed next week.

Support levels: 46.20, 45.65, 43.65, 41.70, 41.00

Resistance levels: 47.60, 50.00, 50.70, 51.00


Overview and Dynamics

With the opening of the trading day on Monday, oil prices continued to fall. The November Brent crude on London's ICE Futures exchange fell by 1.90% to 47.1 dollars per barrel. Spot price for Brent crude dropped below the strong support level of 47.60 and was near the mark of 47.35 in the early European session. At the end of the European session continued decline to the support level 46.20.

After US oilfield services company Baker Hughes reported an increase in the number of active oil rigs in the reporting week (at 7414 units units), the price of oil fell on Friday at the end of the trading day. The number of drilling units in the United States is increasing during the last 11 of the 10 weeks. Only in the last three months, US companies have increased the number of drilling rigs in the unit 91, which is about 30% higher than the 9-month low reached in May. The productivity of wells is in this rising. The participants of the oil market are worried that the recent increase in oil prices causes an increasing number of producers of shale oil in the United States to return to drilling, despite the oversupply of oil in the world.

Some analysts of the oil market at a conference in Singapore last week, found that in the US shale oil producers face a break-even point at the level of the oil price of $ 40-60 per barrel. And while the price of oil will be below these values, the number of drilling rigs in the United States will increase, and this is a very negative factor for the oil market, where, and so the supply exceeds the demand.

Informal meeting of OPEC will be held later in September in Algeria. Expectations that the major producing countries in the world's oil agreed to freeze the current levels of oil production, as we approach the meeting weaken.

Applications chapter for the Federal Reserve Bank of Boston Eric Rosengren, who spoke late last week for a rate hike in the US, further contribute to the growth of the dollar and, consequently, lower prices for commodities, including oil.