After seven weeks of active sales of black gold, which was the longest series since 2011, speculators decided to pause. During this period, they got rid of futures contracts by 553 million barrels in equivalent, reducing net longs to 547 million barrels. In late September, the figure reached 1.1 million in January with a record high of 1.484 million barrels. The second half of autumn has become a real nightmare for fans of Brent and WTI. First, profit taking and then the belief that global supply will outpace demand and the market will return to deficit pushed oil futures quotes to 8-month lows. The transition of the analyzed asset to the territory of the Bears forced OPEC to think about reducing production.
Dynamics of speculative short positions on oil
The consolidation of the North Sea variety is facilitated by rumors about important decisions being made at a meeting of the cartel with other major manufacturers on December 6. Markets are laying in the quotes of futures contracts expectations of reducing production by 1-1.4 million b/s. Saudi Arabia speaks about it openly, but Russia is still holding cards closer to the chest. Vladimir Putin said that Moscow is satisfied with the price of $ 70 per barrel but did not say anything whether the Russian Federation will participate in an agreement to reduce production. According to a study by Wood Mackenzie, the Russian figure hit a record high of 11.4 million b/d in September. Perhaps there is a sense to hold the horses?
By contrast, the US does not hide the desire to realize the dreams of Donald Trump on low oil prices. Their production has increased by almost 25% since the beginning of the year, the number of rigs from Baker Hughes has increased to 888, the maximum mark since March 2015, reserves have been increasing for several weeks in a row. In such circumstances, it becomes clear that the figures of $ 100 per barrel, which appeared in the forecasts recently, seem to be utopian now. Investors believe that the risks of the decline to $50 are currently higher. However, optimists are still in the ranks. In particular, BNP Paribas predicts a rise in Brent quotation to $80 a barrel by the end of 2018 amid a decline in OPEC production. Next year, the bank expects an average price of $69.
To clarify the medium-term prospects for oil, the dynamics of the US dollar is important. The slowdown in the US economy and the speed of normalization of the monetary policy of the Fed paint the future of the USD index in gray colors. On the other hand, you will not find competitors among the G10 currencies in the afternoon with fire, and if the States lose speed, they will pull down global GDP and global oil demand.
Technically on the daily chart, Brent quotes entered the convergence zone of $ 63.85-66.35 per barrel (61.8% of the long-term uptrend - target by 88.6% for the Shark pattern). This circumstance reinforces the risk of a rollback towards 23.6%, 38.2% and 50% from the last downward wave. The rebound from resistances at $ 69.8, $ 73.05 and $ 75.65, as a rule, is used for sales as part of the Shark transformation in 5-0.
Brent daily chart
