Oil market: does it form a reversal or maintain lateral dynamics

In early September, the major crude oil brands  BRENT and WTI  accelerated the growth. Next factors were the reasons for such a rapid upward movement, about 9% for Brent and 9.3% for WTI.

The main reasons for the growth of the oil market in September were:

• a sharp increase in optimism in the market, which was caused by a number of factors
• and a reduction in tension in the US-China trade war, which once again adopted new tariffs and sat down at the negotiating table.

New trade exacerbations should be expected only at the end of the year under the current conditions, . The second significant factor was very positive data on business activity in China. This may safely indicate a continued consumption level by the world’s largest importer of oil. The actions of OPEC + (members of OPEC and non-cartel countries, in particular Russia) aimed at reducing the production and export of crude oil, also contribute.

Also it is worth to note tougher US sanctions on Iran. But this action to a greater extent has only an informational character that affects the mood of the oil market. On the other hand, the Iranian oil minister announced a record export of petroleum products in early September. As a result, this can normalize data on Iran.

Oil brands BRENT and WTI from the technical side

Technically, the oil market remains in lateral dynamics of September. So, the main brands of oil are limited by the trading range: BRENT from 62.00-63.00 to 58.00-57.00, WTI from 57.00-58.00 to 54.00-53.00. At the end of the first trading week of September, major oil brands are trading near the upper borders of the trading ranges. At the same time, the upward dynamics of August-September remains.

BRENT Oil Brand Chart

WTI Oil Brand Chart

On a longer timeframe the dynamics of the main oil brands and the market in general remains downward. Significant resistance in this case are the highs of July 31 and 15. After updating them, it will be possible to talk about a slowdown in the downward dynamics of the oil market in the last four months.

A test of these highs, and hence further oil growth, is possible while maintaining positive signs of global economic growth. This also indicates a continued high level of demand for oil and oil products.

In the conditions of the rebound of major oil brands from the upper boundaries of the trading range, BRENT from 62.00-63.00, WTI from 57.00-58.00, there is a high probability of a test of support levels, lower boundaries of the trading range, BRENT 58.00-57.00 and WTI 54.00-53.00. Significant support for the oil market are the lows of August 7th.

Anton Hanzenko