Another wave of selling on the world stock market has become a catalyst for the collapse of oil prices to 18-month lows. The fall in US stock indices is perceived by investors as a deterioration of the global risk appetite, which is another argument in favor of a slowdown in the global economy. And along with the problems of global GDP, the demand for black gold will also experience difficulties. As a result, the decision of OPEC and other producing countries to reduce production by 1.2 million b/d from January may still not balance the market.
After reaching a four-year peak in October, Brent and WTI lost more than 40% of their value. Prices have fallen by almost 20% since the cartel's decision to reduce production. Currently, OPEC representatives are talking about the possibility of an emergency meeting at which the size of the cut can be increased. In fact, investors doubt it: hedge funds have brought net positions on the Texas grade to the most pessimistic level in the last two years. Why, for example, should Russia continue to give its market share to American manufacturers? If Saudi Arabia is not satisfied with Brent below $70 per barrel, let Riyadh think about how to raise prices. Moscow will be satisfied and $40 per barrel.
When in October, the North Sea variety soared to $86 due to concerns about the impact on the market of US sanctions against Iran, few people believed in a quick rout. With the exception, perhaps, of the American President. And as subsequent events showed, his will is of great importance. Appeals are appeals, and the increase in production in the United States, the easing of sanctions against Tehran and trade wars affecting global demand are powerful weapons that forced Brent and WTI to plunge into the "bear" market. And let Donald Trump mercilessly criticize the Federal Reserve for its increase in the federal funds rate, the fall in US stock indices is an important part of the puzzle: after the S&P 500, oil goes to the south.
Dynamics of Brent and the Dow Jones index
In this regard, the White House's host's attack on Jerome Powell, his conflict with the Democrats over the construction of the wall on the border with Mexico, which led to the temporary shutdown of the US government, can be perceived as a targeted impact on oil and gasoline prices, which leads to a reduction in US spending and could theoretically increase consumption and GDP. Quite an unusual approach, but it allows you to perform another task – to weaken the US dollar.
Thus, along with the potential reduction in global demand for black gold and the inability of OPEC and Russia to resist oil companies from the United States, the dynamics of Brent and WTI is influenced by a political factor. Donald Trump's plans are being implemented, and so far no one knows what price level will satisfy the president.
Technically, on the Brent's daily chart, the implementation of patterns "Splash and reversal with acceleration", "Three Indians" and "Shark" takes placed. The target on the last of them at the level of 88.6% corresponds to the mark of $48.4 per barrel.
Brent, daily chart
