The worst monthly dynamics over the past decade has changed for oil, the best two-day increase since June, thanks to friendship. Warm meeting of Mohammed bin Salman and Vladimir Putin, as well as a joint dinner of Donald Trump and Xi Jinping at the G20 summit in Buenos Aires, inspire hope for solving several problems of the bulls in Brent and WTI. On the one hand, there are growing risks of production cuts following the OPEC meeting on December 6. On the other hand, the de-escalation of the trade conflict can have a positive effect on global demand for black gold. The market had a reason for the correction to the "bearish" trend, and he hurried to use it.
If Russia can afford lower oil prices, then for Saudi Arabia, this is highly undesirable. The question is, by what size will Riyadh persuade Moscow to cut production? According to Reuters, the Kremlin is ready for 140 thousand b / d, the cartel would like to receive from it 250-300 thousand b / d. In one of the previous materials, I noted that there was still a third player in the face of the United States, but the cooling of relations between Vladimir Putin and Donald Trump after the incident in the Kerch Strait does not allow discussing the option under which the Russian Federation is increasing production. The states believe that they will do without Russia in such an important matter as the reduction of the cost of black gold. Let them continue to think so.
Dynamics of oil production growth
The loud statements of Saudi Arabia on the eve of the OPEC summit on December 6 about the need to stabilize the market by joint efforts and that Riyadh alone does not intend to cut production, are focused more on the cartel. Formally, the meeting may be about a proportional reduction in production by 3-3.5% from October levels, however, it is obvious that each of the participating countries will bear an individual load. The total volume of cuts (together with Russia) can reach 1.3-1.4 million b / s.
From the point of view of the proposal, the support of the "bulls" for Brent and WTI was provided by Canada's statement to reduce production by 325 thousand b / d. The government intends to unload the warehouses and put an end to the crisis in the oil industry. The requirements of the official Ottawa to manufacturing companies will be valid until the end of 2019, although the volume of reductions is planned to be gradually reduced.
As for the truce in the trade wars, its influence on the black gold market is manifested in two main areas. First, the States will not temporarily impose duties on all Chinese imports. If this happened, the economy of the Middle Kingdom, according to the calculations of the Financial Times, already in 2019 would have slowed down by 1-1.5 pp China is the largest consumer of oil, so the positive news has become a catalyst for the attack of the bulls in Brent and WTI. Secondly, the de-escalation of the conflict leads to a weakening of the American dollar, which should also be considered as good news for black gold.
Technically, after reaching the target of 113% for the "Shark" pattern, a regular rebound followed. The probability of development of correction in the direction of 23.6%, 38.2% and 50% of the CD wave is high.
Brent, the daily chart
