Oil Updates by Solid ECN

[SOLIDECN]

Brent Crude Oil prices show a slight corrective growth, recovering from the "bearish" start of the week, which led to the renewal of local lows from April 12. Analysts attribute the current increase in quotes to technical factors, while the general news background still exerts moderate pressure on oil.

First of all, traders are concerned about the risks of lower demand for energy in China. The authorities are reporting an outbreak in Beijing, which again threatens a large-scale lockdown that will affect millions of people and lead to a marked reduction in industrial production. In the capital, 22 non-imported cases of COVID-19 were detected the day before, as a result of which a number of gyms and children's clubs suspended work. China remains one of the few countries that have adopted a "zero tolerance" policy, imposing mandatory quarantine for those who come into contact with infected citizens in order to contain the spread of the disease.

The growing US dollar, which is actively in demand as a safe haven, also has a negative effect on oil. Today, traders will focus on the data on the dynamics of Durable Goods Orders. Analysts' current forecasts are quite optimistic and suggest a 1% increase in March volumes after a 2.1% decline a month earlier. Also during the day, the weekly report of the American Petroleum Institute (API) on the dynamics of stocks for the week ended April 22 is going to be released. The previous publication reflected a sharp decline in the rate of 4.496 million barrels.

Bollinger Bands in D1 chart demonstrate flat dynamics. The price range is almost unchanged, reflecting ambiguous dynamics of trading in the short term. MACD is going down, demonstrating a fairly stable sell signal (located below the signal line). The indicator is trying to consolidate below the zero level. Stochastic keeps a downward direction but is already approaching its lows, which indicates the risks of oversold instrument in the ultra-short term.

Resistance levels: 104, 106, 109, 112 | Support levels: 100, 96.5, 93.34, 90

 

[SOLIDECN]

Benchmark Brent Crude Oil prices are correcting upwards, trading just below 105.00 amid fears of market participants for demand from China, where a new outbreak of coronavirus is recorded, which could trigger another tightening of quarantine measures with a possible suspension of factories and, as a result, reduction in the consumption of hydrocarbons and energy carriers.

Nevertheless, the quotes of “black gold” on world exchanges confidently hold above 100 dollars per barrel, and there are no serious prerequisites for a decline yet. Measures by the US government and allies to release additional energy resources from the reserves led to almost nothing. Also, European officials are increasingly speaking out in favor of the fact that the refusal to import oil products from the Russian Federation is now impossible, and the deadlines until 2027 are called guidelines for a complete refusal of supplies. Meanwhile, the World Bank experts in the Commodity Market Review predicted an increase in energy prices this year by more than 50%: Brent Crude Oil quotations will be 100 dollars per barrel, reaching the highest level since 2014, and then, in the subsequent two years will slow down the upward trend. EU coal and natural gas prices are expected to hit new highs, with gas prices likely to more than double from 2021 levels.

Yesterday, the American Petroleum Institute (API) announced another serious increase in weekly stocks of raw materials: the figure consolidated around 4.780M barrels, although analysts had expected growth to 2.167M barrels. Today, the Energy Information Agency (EIA) will publish its data: the value may reach 2,000M barrels.

On the global chart, the price is moving as part of the Triangle pattern formation. Technical indicators are uncertain and do not give a clear signal: fast EMAs of the Alligator indicator have crossed each other, and the AO oscillator histogram is forming rising bars near the transition level.

Resistance levels: 111.87, 127.85 | Support levels: 98.5, 84.5​

 

[SOLIDECN]

Benchmark Brent Crude Oil prices are correcting, trading just above 108 dollars per barrel amid production cuts by Russia, one of the largest exporters of "black gold". It is reported that production decreased by 9% compared to March values against the backdrop of the desire of Western countries to abandon the supply of resources after the start of a special military operation by Russian troops in Ukraine.

According to statistics, the most serious reduction was made by PJSC Rosneft, reducing production by 20%, and two other major market players, PJSC Gazpromneft and PJSC Surgutneftegaz, adjusted the figure by 4% each. Against this backdrop, OPEC+, which is scheduled to meet on May 5, is considering to continue increasing production levels by 432K barrels per day instead of the traditional monthly increase by 400K to slightly compensate for the existing losses of Russian oil.

Meanwhile, the British-Dutch oil and gas corporation Royal Dutch Shell refused to purchase refined products with any content of Russian raw materials, including fuel mixtures, while the French Total Energies plans to stop the lubricants business in Russia by the end of the month.

As for local trends, the day before, the Energy Information Administration (EIA) announced an expected increase in inventories held by US firms by 0.692M barrels after a serious reduction last week by 8.020M barrels, which had a positive impact on asset quotes.

On the daily chart, the price continues to trade as part of the formation of the global Triangle pattern. Technical indicators are in a state of uncertainty and do not give a clear signal to either side: the fast Alligator indicator EMAs crossed each other, and the histogram of the AO oscillator is forming ascending bars, being at the transition level.

Support levels: 101, 90.2 | Resistance levels: 111.85, 129.38​

 

[SOLIDECN]

A period of active fluctuations continues on the oil market, as attempts by the European authorities to reduce dependence on energy imports from the Russian Federation by any means can have a serious impact on quotes. Benchmark Brent Crude Oil prices are currently correcting, trading just below 106 dollars per barrel after the release of information about the possible content of a new, sixth in a row, package of sanctions against the Russian economy.

The day before it became known that the new list of restrictions may include an embargo on oil, as well as the disconnection of a number of Russian and Belarusian financial institutions from the SWIFT system. The European Union intends to propose a ban on fuel supplies from the Russian Federation by the end of this year, and until then, gradually limit imports. The approval of the sixth package of anti-Russian sanctions will require the support of all 27 member states of the European Union.

Meanwhile, OPEC+ is trying to prevent serious fluctuations in the market and is preparing to allow countries to increase the level of oil production by 432M barrels. Saudi Arabia continues to increase the pace, increasing production to 10.26M barrels in April against 10.19M a month earlier (in annual terms, the figure rose by 25.5%), while the rest of the cartel member countries in the majority reduced oil production levels: Nigeria reduced the figure from 1.42M barrels to 1.35M barrels, in Libya the production declined from 1.11M barrels to 1.07M barrels, and Congo reduced its production from 0.27M barrels to 0.26M barrels.

On the daily chart, the price continues to trade as part of the formation of the global Triangle pattern. Technical indicators are in a state of uncertainty and are not giving a clear signal: the fast Alligator indicator EMAs crossed each other, and the histogram of the AO oscillator is forming ascending bars, being at the transition level in the sales zone.

Support levels: 102, 94.3 | Resistance levels: 111.85, 127.8​

 

[SOLIDECN]

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Mid-term trend has changed to a downward one​

WTI Crude Oil quotes are trading around 103.66 amid the publication of data on a drop in production in China to the lowest value since February 2020 after another outbreak of coronavirus infection in the country (the April purchasing managers' index (PMI) was fixed at 47.4 points). If a lockdown or other strict quarantine restrictions are introduced in Beijing, which will become a catalyst for stopping the activities of the largest production facilities, then the demand for oil will be significantly adjusted, pushing energy prices to bearish dynamics. At the moment, the activity of oil traders remains reduced, as markets in Japan, India and Southeast Asian countries are closed at the beginning of the week due to the celebration of Labor Day.

Investors are waiting for the publication of the sixth sanctions package against the Russian economy, which, among other things, will contain steps to cancel energy supplies. Representatives of the eurozone countries intend to completely get rid of oil dependence by the end of the year, and until that time they will introduce gradual restrictions on imports. It is worth noting the unity of positions on the issue: Germany stated that it was ready to support an immediate EU embargo on the import of Russian "black gold", and the authorities of Hungary, Austria and Slovakia withdrew their veto on the oil embargo after intensive negotiations, which will now allow the procedure to be carried out in a shorter time. Earlier, the Energy Ministers of the region also rejected Russia's demand to pay for the supply of "blue fuel" in rubles.

The long-term trend, however, remains upward. Now the price is approaching the upper limit of the 108.75 corridor and, if this level is broken out, the next target of quotations will be the 117.50 mark. If the resistance of 108.75 is held by the bidders, then the asset will decline to the level of 95.

The mid-term trend changed to a downward one last week after the breakdown of the target zone 100.70–99.83 and now the reference point for the "bears" is zone 2 91.95-91.08. Also last week, the price of WTI Crude Oil reached the key trend resistance of 105.09–104.22. While this area is being held, it is worth considering short positions on the instrument.

At the moment, market participants are trying to break through the key resistance of 105.09–104.22. If successful, the trend will change to an upward one, and the target zone (113.84–112.97) will become the target for purchases.

Resistance levels: 108.75, 117.5 | Support levels: 95, 85

 

[SOLIDECN]

A serious rally in the oil market, associated with global economic instability and the development of the Ukrainian crisis, has been going on for more than two months and is unlikely to stop in the near future. Last week, the quotes of WTI Crude Oil resumed growth and rose to the level of 106.25 (Murray [7/8]), which is now being actively tested.

The market is in a state of considerable uncertainty, as it is influenced by several opposite factors. The pressure on energy quotes is exerted by the complex epidemiological situation in China, where an increase in the incidence of coronavirus is recorded. At the moment, Beijing remains under threat of complete lockdown, while the financial and industrial center of Shanghai has been in strict isolation for more than a month. The continued tightening of quarantine restrictions continues to jeopardize the demand for oil from the Chinese economy, which is its first global consumer.

On the other hand, the embargo announced today on the supply of Russian oil and petroleum products to the EU countries contributes to the growth of quotations. The head of the European Commission, Ursula von der Leyen, announced her readiness to refuse the purchase of raw materials by the end of this year. However, an exception will be made for a number of countries most dependent on Russian oil, for example Hungary and Slovakia. The embargo on Russian resources, which account for 26% of imports to the EU, creates the problem of replacing the missing volumes. It will not be easy to solve it, since global production is already unable to meet demand. Meanwhile, the OPEC+ cartel is in no hurry to increase oil production, as its members are satisfied with the current windfall. It is expected that during the meeting scheduled for Thursday, a decision will be made to maintain a moderate pace of production growth.

Another factor supporting prices is the reduction of reserves of "black gold". According to the latest data from the American Petroleum Institute (API), a decrease of 3.479M barrels was recorded. A similar report from the Energy Information Administration of the US Department of Energy (EIA) will be released today, which may also reflect a downward correction of 0.829M barrels. Under these conditions, oil quotes may continue the upward trend.

Consolidation of the price above the mark of 106.25 (Murray [5/8]) will give the prospect of growth of the trading instrument to the levels of 112.50 (Murray [6/8], Fibo retracement of 23.6%) and 118.75 (Murray [7/8]). If the price consolidates below the middle line of the Bollinger Bands and the 100.00 mark (Murray [4/8]), the decline will resume in the area of 93.75 (Murray [3/8]) and 87.50 (Murray [2/8], Fibo retracement of 61.8%).

The indicators do not give a single signal: the Bollinger Bands are horizontal, the MACD histogram is at the zero line, its volumes are insignificant, and the Stochastic is directed downwards.

Resistance levels: 106.25, 112.50, 118.75 | Support levels: 100, 93.75, 87.5​

 

[SOLIDECN]

Prices for benchmark Brent Crude Oil are correcting, trading above the 110 dollars per barrel mark amid the disclosure of information about shady transactions for the purchase of Russian "black gold" by China.

There has been an upward turn in the market after the Financial Times published an article that disclosed information about the purchase of Russian oil by Chinese refineries from state-owned traders incognito in order to avoid US sanctions. The newspaper refers to an employee of a private oil refinery in Shandong, who said that deliveries have been carried out since the beginning of March, and these transactions have not been publicly disclosed. First of all, this news alerted officials in the USA and the EU, who are developing restrictions on energy imports from the Russian Federation. So, the EU authorities presented the sixth package of sanctions against the Russian economy, which includes steps to phase out the supply of "black gold". According to the President of the European Commission, Ursula von der Leyen, the achievement of a full embargo on oil will be possible only in six months, and on petroleum products – at the end of this year. An exception will be made only for Slovakia and Hungary, which will still be able to buy resources from Russia under existing contracts, since their dependence on supplies is very high. The sixth package of sanctions will be approved on May 10 at the next meeting of the EU Council on Foreign Affairs.

On the weekly chart, the price attempts to overcome the resistance line of the global triangle pattern. Technical indicators reversed and issued a new buy signal: the fast EMAs of the alligator indicator crossed the signal line from the bottom up, and the histogram of the AO oscillator moved into the buy zone.

Support levels: 100.8, 90.1 | Resistance levels: 113.26, 129​

 

[SOLIDECN]

On the daily chart, an ascending wave C is developing, in which the first wave 1 of (1) of C was formed. At the moment, the downward correction continues to develop as the second wave 2 of (1) of C, in which the lower level wave a of 2 has formed and the wave b of 2 is developing.

If the assumption is correct, the price will fall to the levels of 77.08 - 62.5. The level of 139.45 is critical and stop-loss for this scenario.

 

[SOLIDECN]

On the daily chart, crude oil tests the resistance at $109 for the third continues trading day. The level's break-out is imminent. In this case, the next target will be March 24th peak at $115.8.

On the 6H time frame, the pair is trading in the uptrend tunnel struggling for a break-out. If the bears can push the black gold below the 25 daily moving average, we will witnessing a double top pattern. In this scenario, the correction started from March higher highs will continue, and a retest of the support levels at $99.5 and $99 can be seen in the upcoming weeks.

Resistance Levels: $109.26 , $111.69 , 126.63 | Support Levels: $105.2 , $99 , $92.2

Trade suggestions:
Buy stop: $110.3 , Target: $115.5 , Stop: $105.4
Sell stop: $106.1 , Target: $99.3 , Stop: $110.8​

 

[SOLIDECN]

Brent Crude Oil prices are consolidating near 104.00, correcting after an active decline yesterday. At the beginning of the current trading week, quotes lost sharply in value in response to reports that several EU countries are still blocking the introduction of a full-fledged oil embargo on supplies from Russia.

Last Sunday, the leaders of the G7 countries held talks via videoconference, within which the decision to phase out energy resources and ban the import of "black gold" from Russia was supported. Against this background, the participating countries pledged to cooperate on the issue of ensuring the stability of supplies, finding suppliers, and reducing fuel dependence. Meanwhile, negotiations in the EU concerning new sanctions under the sixth package of economic restrictions on the supply of Russian oil and petroleum products ended unsuccessfully. The representatives of Hungary voted against them, as the country's dependence on supplies from the Russian Federation is about 60%, and this blocking does not yet allow the introduction of a pan-European embargo. The next round of negotiations can be started today, but the head of the European Commission, Ursula von der Leyen, said that progress in discussing the issue with the country's leader Viktor Orban is noticeable.

Meanwhile, Saudi Arabia adjusted Arab Light crude prices to 4.40 dollars per barrel for June Asian deliveries for the first time in four months. The indicator dropped significantly compared to the May value of 9.35 dollars. The decline is due to the current uncertainty in the oil market and, in particular, a possible ban on the supply of Russian "black gold" due to the escalation of the military conflict in Ukraine and the strengthening of quarantine restrictions in China. The country's authorities, adhering to the policy of "zero tolerance" regarding the spread of COVID-19, introduced quarantine in Shanghai and Beijing, which led to a noticeable decrease in demand in the oil market.

On Tuesday, traders will focus on the publication of the American Petroleum Institute (API) on stocks in the US for the week of May 6. The previous report reflected a sharp decline of 3.479M barrels.

On the daily chart, Bollinger bands show predominantly flat dynamics: the price range practically does not change, remaining quite spacious for the current level of activity in the market. MACD falls below the signal line, keeping a strong sell signal, and prepares to consolidate below the zero line. Stochastic shows a more active decline, rapidly approaching its lows and indicating that the instrument may become oversold in the ultra-short term.

Resistance levels: 106, 109, 112, 115.5 | Support levels: 102.57, 100, 96.5, 93.34

 

[SOLIDECN]

WTI oil prices show corrective growth during the Asian session, recovering from a rather active decline at the beginning of the current trading week. Quotes are testing the level of 101.00; however, the factors capable of having a significant impact on the dynamics of the trading instrument have not yet appeared on the market. Earlier, oil prices came under pressure due to the fact that the EU countries did not agree on restrictions on the import of oil products from Russia in their sixth round of sanctions. In addition, low demand for oil from China did not allow the "bulls" to develop an upward momentum in the asset.

The day before it became known that a ban on the transportation of oil was excluded from the next package of anti-Russian sanctions, since the decision provides for coordination at the international level, including representatives of the G7 countries. According to the Deutsche Presse-Agentur, countries such as Greece, Cyprus and Malta are currently opposed to restrictions, arguing that the activities of local shipping companies could be under pressure. In addition, another round of talks between French President Emmanuel Macron and Hungarian Prime Minister Viktor Orban took place the day before, and it is reported that the parties managed to reach an agreement on an embargo on Russian oil and oil products.

Additional pressure on oil quotes was exerted by the report published the day before by the American Petroleum Institute (API) for the week ended May 6, according to which US inventories increased by 1.618 million barrels after a sharp decline by 3.479 million barrels over the past period. During the day, the dynamics of oil reserves from the US Department of Energy is expected to be released. Current forecasts suggest a decline of 1.200 million barrels after rising by 1.302 million barrels last week.

Bollinger Bands in D1 chart demonstrate flat dynamics. The price range is almost constant, remaining rather spacious for the current level of activity in the market. MACD is going down preserving a strong sell signal (located below the signal line). The indicator is trying to consolidate below the zero level. Stochastic retains a steady downtrend but is located in close proximity to its lows, which indicates the risks of oversold instrument in the ultra-short term.

Resistance levels: 101.37, 103, 105, 107.67 | Support levels: 100, 98, 96, 93.97

 

[SOLIDECN]

Benchmark Brent Crude Oil is correcting, trading just above 105 dollars per barrel. The quotes stopped their protracted decline and made a significant leap up against the backdrop of positive news from China and the growth of energy reserves in the United States.

Yesterday it became known that the situation with the spread of coronavirus infection in China has improved significantly, and the number of new cases of infection in Shanghai, where severe restrictions were introduced, decreased by 51%. On Wednesday, authorities in the industrial center said that the number of cases of COVID-19 had been reduced to zero in at least half of the city's districts, but there is no talk of lifting restrictions yet. Thus, fears for a decrease in demand in the world oil market have weakened.

Yesterday, Bloomberg reported that European politicians were preparing a plan to reduce the dependence of EU countries on imports of Russian energy resources. In particular, it is planned to develop renewable energy, increasing its share to 45%, as well as to reduce electricity consumption by 13% by 2030 instead of the 9% previously indicated. The measures will also allow significant savings on the purchase of gas, oil, and coal by 80B euros, 12B euros, and 1.7B euros per year, respectively. The document will also contain steps to replace resources from the Russian Federation in the event of an immediate cessation of supplies.

Additional support for the quotes of the asset was provided by statistical data from the United States. The American Petroleum Institute (API) reported an increase of 1.618M barrels in inventories after reducing by 3.479M a week earlier, followed by the Energy Information Agency (EIA) reported a significant increase in inventories of 8.487M barrels from 1.302M a week earlier.

Yesterday, Washington again called on the OPEC+ countries to increase oil production levels. In case of refusal, Saudi Arabia will be accused of cartel conspiracy, and a corresponding bill will be adopted. Current production levels, according to the US authorities, could push the economy into recession, contribute to a crisis in the cost of living, and put pressure on both supply and demand for energy resources. Saudi Arabia has threatened that if this bill is passed, the country will reserve the right to refuse to pay in dollars when selling oil and investing in the American economy.

On the global chart, the price moves within the Triangle pattern. Technical indicators remain uncertain without giving clear signals: the fast EMAs of the Alligator indicator are close to the signal line, and the AO oscillator histogram is at the transition level without leaving any of the zones.

Resistance levels: 112.2, 128.16 | Support levels: 100.5, 90​

 

[SOLIDECN]

The quotes of WTI Crude Oil have been trading for the second month within a wide lateral range of 111 - 95 and cannot yet determine the direction of further movement.

Market uncertainty is supported by two main factors. The possible introduction of an embargo on Russian oil supplies to EU countries contributes to the growth, a decision on this is being worked out, but has not yet been agreed due to the extreme dependence of a number of European countries on supplies from Russia. On the other hand, the strengthening of the exchange rate is hindered by the outbreak of the coronavirus pandemic in China, the world's largest exporter of "black gold". The deterioration of the epidemiological situation in the country can seriously undermine demand.

Recent statements by the International Energy Agency (IEA) and OPEC are also holding back growth. The head of the IEA, Fatih Birol, announced the possibility of bringing additional volumes from reserves to the market if necessary. The cartel's management has again lowered its forecast for the growth of global oil demand this year, citing the impact of the Ukrainian crisis, rising inflation and the development of a pandemic in China. This year, demand may reach 3.36M barrels per day, which is 20K barrels lower than the previous forecast. This situation practically guarantees that OPEC and its allies will maintain the previous insignificant rates of production growth. Nevertheless, despite a number of negative factors for the oil market, fears of the EU's refusal to supply Russian "black gold" still dominate.

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The price has risen above the mark of 106.25 (Murray [1/8]), supported by the middle line of the Bollinger Bands, and may continue to rise to the levels of 112.50 (Murray [2/8], Fibo retracement of 23.6%) and 118.75 (Murray [3/8]). The key level for the "bears" is at 100 (Murray [0/8]). If consolidated below it, a decline to 93.75 (Murray [-1/8]) and 87.50 (Murray [-2/8], Fibo retracement of 61.8%) may begin.

Technical indicators do not give a single signal: the Bollinger Bands are horizontal, the MACD histogram is at the zero line, its volumes are insignificant, and the Stochastic is directed upwards.

Resistance levels: 112.50, 118.75, 125 | Support levels: 100, 93.75, 87.5​

 

[SOLIDECN]

During the Asian session, Brent Crude Oil prices are moderately declining, retreating from local highs of May 9 at 111.5 and testing 108.5.

The positive dynamics at the end of last week were due to the announcement of new restrictions on the import of Russian oil by the EU. It tries to agree on the sixth package of sanctions against the Russian economy, including a ban on oil supplies, which so far does not find unanimous support among all states since, according to Bloomberg, the heads of some of them have proposed to postpone the embargo. Although specific information was not disclosed, market participants consider a possible refusal as a sign of EU weakness. However, the European Commission was earlier ready to provide financial compensation to countries most dependent on Russian supplies, such as Hungary and Slovakia. Prime Minister of Hungary Viktor Orban said that any changes regarding oil transportation should be discussed at EU leaders, while he announced his readiness to support a pan-European solution if pipelines that supply Russian oil are excluded from the sanctions package. Certain steps are being taken toward reducing Europe's energy dependence on Russia, and agreeing on the terms of a full or partial oil embargo is only a matter of time. Also, unilateral sanctions by the Russian government should not be ruled out.

A report from the International Energy Agency published last week had a certain impact on the market dynamics. It says that rising oil production in the Middle East and the United States will positively impact supply dynamics in the market. Also, given the declining demand for hydrocarbons, it is likely that soon it will be possible to avoid a situation of acute shortage in the market.

On the daily chart, Bollinger bands are growing slightly: the price range is practically unchanged, remaining quite spacious for the current level of activity in the market. The MACD indicator grows, keeping a relatively strong buy signal (the histogram is above the signal line). Stochastic shows similar dynamics. However, it is quickly approaching its highs, which indicates that the instrument may become overbought in the ultra-short term.

Resistance levels: 109, 112, 115.50, 118.32 | Support levels: 106, 102.57, 100, 96.5

 

[SOLIDECN]

Benchmark Brent Crude Oil price is correcting, trading just above 112 dollars per barrel.

The quotes have returned to upward dynamics against the backdrop of positive reports received this week about the stabilization of supply in the hydrocarbon market. For example, Saudi Arabia announced that it plans to increase oil production to 13.4M barrels per day by 2027. The country's energy minister, Abdulaziz bin Salman Al Saud, said the country is ready for such an increase in production and will maintain it at this level if the market demands such a volume, but so far, this is not happening.

Iran's state oil company NIOC said it could double the current level of supplies to the global market if buyers are willing. The corporation can achieve similar volumes after the start of the second stage of development of the Azedegan field, whose reserves are estimated at 32B barrels.

Local support for the quotes of "black gold" was provided by a Reuters report, according to which India has seriously increased the volume of oil purchases from Russia. According to the agency, India has placed orders for at least 40M barrels of oil on the exchange between mid-February and now, which significantly exceeds the entire volume of purchases in 2021, which amounted to 16M barrels.

On the global chart, the price tried to exit the Triangle pattern. The technical indicators reversed and gave a buy signal: fast EMAs of the Alligator indicator crossed the signal line upwards, and the AO oscillator histogram again moved into the buy zone.

Resistance levels: 118.20, 131.8 | Support levels: 108.30, 98.8​

 

[SOLIDECN]

Crude Oil, growth is possible, but correction risks remain

The quotes of WTI Crude Oil have formed a short-term upward channel and this week have reached its upper limit around 115.5.

Currently, prices are supported by positive pandemic data from China and a reduction in oil inventories in the United States. Today it became known that the Chinese authorities allowed 864 institutions to resume work in Shanghai after no new coronavirus cases were recorded outside the quarantine zones of the metropolis for three days. The retreat of the pandemic and the reopening of China's leading financial center give investors hope for stronger demand for oil in the Chinese economy. At the same time, US oil inventories declined again. According to the latest report from the American Petroleum Institute (API), the volume of oil reserves in the United States decreased by 2.445M barrels. So far, the situation seems to be favorable for the market. However, significant risks of price correction remain. They are associated with the postponement of the announced but still not implemented EU embargo on the supply of Russian "black gold." Experts fear that Hungary, which opposes the restrictions, will not be persuaded, or this process may be extremely protracted. Another negative factor for prices could be a US government permit for Chevron Corp. to negotiate oil supplies from Venezuela. If successful, the volume of energy supplies to the market may increase.

Further price growth is slowed down by the upper limit of the rising channel, around 115.50. If it consolidates above it, the positive dynamics will continue to 118.75 (Murrey [3/8]) and 125.00 (Murrey [4/8]). If 111.50 (Fibonacci retracement 23.6%) is broken down, a correction to 106.25 (Murrey [1/8], the middle line of Bollinger Bands), 102.50 (Fibonacci retracement 38.2%, the lower limit of the ascending channel) may develop. The indicators do not give a single signal: Bollinger bands reverse upwards, the MACD histogram increases in the positive zone but Stochastic is getting ready to leave the overbought zone and may form a sell signal.

Resistance levels: 115.5, 118.75, 125 | Support levels: 111.5, 106.25, 102.5​

 

[SOLIDECN]

Yesterday, Brent Crude Oil prices declined moderately, continuing the development of the corrective impulse formed on Tuesday, when the instrument was at its local highs since March 28 and near the psychological resistance of 114 dollars per barrel.

The pressure on quotes is exerted by reports that the sixth package of EU sanctions against the Russian economy has been blocked. The new restrictions provided for a full or partial reduction in the import of Russian oil and oil products. The issue, as expected, was met with strong resistance from several members of the union, as a result of which the parties could not agree on the exact terms. Negotiations within the bloc will continue. The United States proposed not introducing a complete embargo (at least at the first stage) but implementing import duties only.

Yesterday the quotes were moderately supported by data from the US Department of Energy on the dynamics of oil reserves. Thus, for the week of May 13, oil inventories decreased by 3.394M barrels after a steady increase of 8.487M barrels over the previous period, although market forecasts assumed that positive dynamics would remain at 1.383M barrels.

On the daily chart, Bollinger Bands show ambiguous dynamics. The price range remains virtually unchanged, remaining spacious enough for the current level of activity in the market. The MACD indicator falls, keeping a poor sell signal (the histogram is below the signal line). Having retreated from its highs, Stochastic maintains a confident downward direction and has not yet reacted to an attempt to resume growth.

It is better to keep the current short positions until the signals from technical indicators are clarified.

Resistance levels: 109, 112, 115.5, 118.32 | Support levels: 106, 102.57, 100, 96.5

 

[SOLIDECN]

On the daily chart, the upward wave C develops, within which the first wave 1 of (1) of C formed. Now, a downward correction is forming as the second wave 2 of (1) of C, within which the wave of the lower level a of 2 has formed, and the wave b of 2 has ended as a triangle.

If the assumption is correct, the price will fall to the levels of 77.08 - 62.5. In this scenario, critical stop loss level is 115.62.

 

[SOLIDECN]

On the daily chart, the first wave of the higher level 1 of (1) of C developed, and a downward correction forms as the second wave 2 of (1) of C. Now, the wave of the lower level a of 2 is developing, within which the correctional wave (ii) of a has ended.

If the assumption is correct, the price will fall within the wave (iii) of a to the levels of 82.3 - 67. In this scenario, critical stop loss level is 131.17.

 

[SOLIDECN]

During the Asian session, Brent Crude Oil prices slightly decline, consolidating near 110 dollars per barrel. Yesterday, the quotes failed to record steady growth, despite the general correction of the US currency.

Investors fear that the protracted military conflict in Ukraine and the widespread decline in business activity will lead to a noticeable reduction in demand for "black gold." Nevertheless, there are also favorable factors on the market, for example, the upcoming summer season in the US, when traditionally, the demand among the population for gasoline and other petroleum products is increasing. Skeptics, however, point to a record jump in fuel prices, suggesting a decline compared to the period before the start of the COVID-19 pandemic.

On Tuesday, investors are focused on a block of macroeconomic PMI statistics from Europe and the US. Analysts' forecasts are very negative and suggest a general decline in indices. Also, during the day, a report from the American Petroleum Institute (API) on stocks in the US for the week of May 20 will be released. The previous report showed a decline of 2.445M barrels.

The head of the International Energy Agency (IEA), Fatih Birol, speaking at the World Economic Forum in Davos, which started on Sunday, said that global geopolitical tensions amid the escalation of the military conflict in Ukraine and the ensuing energy security crisis should not lead to even greater dependence states from fossil fuels. Currently, energy prices are too high, which is a negative factor for economic recovery around the world, especially in developing importing countries. The official also said that increased demand for "black gold" in China could pressure the global economy.

On the daily chart, Bollinger bands move flat: the price range remains practically unchanged, remaining quite spacious for the current level of activity in the market. The MACD indicator tries to reverse into a downward plane, keeping its previous buy signal (the histogram is above the signal line). Stochastic remains relatively strong growth. However, it is close to its highs, indicating that the instrument may become overbought in the ultra-short term.

Resistance levels: 112, 114.09, 115.5, 118.32 | Support levels: 109, 106, 102.57, 100