2019-11-11 • Updated
The oil market is always highly volatile. But the environment of recent days made traders worry a lot. This outlook on the oil market will be clouded by negative factors that made oil strongly plunge.
Let’s start with the major factors which made the market panic.
Saudi Arabia unexpectedly increased the oil production to support the lack of the supply from Venezuela, Libya, and Iran.
However, warns about the decline in the supply were wasted worrying.
The largest field in the east of Libya was attacked at the beginning of July. As a result, the country lost thousands of barrels. However, recently the production was resumed, and the whole amount of Libyan oil increased by 650-700K barrels. Moreover, the country plans to increase the production further.
Iraq raised the oil exports by 6% in the first half of July. Up to date, it’s the biggest exports since November 2016.
Iran and US sanctions remain one of the major drivers of the oil market. The Iran Minister of foreign affairs said that countries which want to keep the Iran nuclear agreement have taken measures to let Iran continue supplying.
The US is said to consider the usage of oil from Strategic Reserves.
Moreover, analysts predict a decline in the oil demand because of the slowdown in the global economic growth.
You see there were too many negative factors that caused a strong plunge of the oil benchmarks.
Technical side
During just one week, Brent has fallen from $78.60 to $71.50, WTI from $74 to $68. Up to now, both oil benchmarks have been recovering to their fair prices as the fall was caused by the market panic. Brent is climbing to $75.65, WTI to $71.50. If no negative events happen to the oil market in the near future, the oil benchmarks will be able to recover. Otherwise, Brent and WTI may exceed their losses.
What should we expect?
It seems like the oil market will suffer hard times in the future. The US Energy Information Administration forecasts Brent crude oil prices average $73 per barrel in the second half of 2018 and $69 per barrel in 2019. WTI will average $66 per barrel in the second half of 2018 and $62 per barrel in 2019.
However, not all experts agree with such pessimistic perspectives.
Despite the rise of the supply and the fall of the demand, Goldman Sachs remains bullish on the oil prices. The Bank anticipates volatile oil market in the near-term with Brent prices within $70-80 per barrel. However, Brent will be able to test $80 level at the end of the year.
Morgan Stanley is even more optimistic. According to the Bank, supply disruption will continue to affect the market that will increase the prices. The oil market will tighten despite contradictory signals. As a result, Brent will reach $85 by the end of the year.
Making a conclusion, we can say that the oil market will remain highly volatile. Trade wars will cause the slowdown of the global economic growth. As a result, the oil demand will fall. However, the question of the supply remains unanswered. The supply will depend on the sanctions and production of the major oil producers. News will remain the major driver of the oil market.
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Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.
Bearish scenario: Sell below 1.0820 / 1.0841... Bullish scenario: Buy above 1.0827...
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