Oil seeks protection from the Fed

You start to feel bad when you make a seemingly reasonable forecast, and the market refuses it a day later. The International Energy Agency said with optimism that the agreement between OPEC and other producing countries allowed oil to grope the floor under their feet near the $ 60 mark per barrel, and a few hours later Brent began to knock on this floor. Strikes will go further south. Against the background of a record growth in production in Russia (11.42 million b / s) and in the United States (11.7 million b / s), no one will be surprised by the continuation of the downward trend. And the bets on the fact that shale mining in the States against the background of low prices for black gold, sooner or later, capitulate, in fact, are not worth a damn. Not so long ago, oil was quoted at $ 30 a barrel, and its growth to more than $ 80 allowed American companies to hedge risks.

Optimists claim that since OPEC production cuts will begin in January, prices will go up a little later. Pessimists, on the contrary, nod to the growth of global stocks. Trade wars, a slowdown in the economies of the United States, the eurozone, and China, coupled with a strong dollar, which makes oil in the consumer countries even more expensive, exert pressure on global demand. Nevertheless, the IEA in its latest forecast left its growth in 2019 at the level of +1.4 million b / s, motivating its decision by the fall in the value of black gold in October-December. The increase in production in non-OPEC countries, according to an authoritative organization, will decline from +2.4 million bpd in 2018 to +1.5 million bpd in 2019.

I do not think that the fact that the cartel will begin to reduce production only in January does not yet provide support to the bulls in Brent and WTI. Markets are growing on expectations, but for some reason they prefer to wait for the facts. There are doubts that OPEC will fulfill its obligations? In fact, it is not yet known how the negotiations between Washington and Beijing will end and how much the global economy will slow down; the main "bearish" driver is the States. The growth of stocks in Cushing continues, which indicates the oversaturation of the American market.

Dynamics of oil reserves in Cushing and oil pricesNot only that the United States has already overtaken Saudi Arabia and Russia, as well as shale production in the seven largest American basins for the first time in history has risen above 8 million b / s. Given the activity of US producers in the derivatives market, it can be assumed that a further fall in prices does not particularly bother them. To contain the offensive outburst of the "bears" over Brent and WTI, active actions are needed from Riyadh and Moscow, as well as ... a weak dollar. In this regard, the hopes of fans of black gold in the December meeting of the FOMC can be realized. Jerome Powell's "pigeon" rhetoric and the Fed's worsening forecasts for key indicators can put pressure on the USD index.

Technically, after reaching a target of 113% for the Shark pattern, the risks of recoil increased, at least to 23.6% of the CD wave as part of its transformation into a 5-0 model. As a result, Brent may enter the consolidation state in the range of $ 57.5-64.5 per barrel.

Brent, the daily chart

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