Cloudy prospects for the oil market

After the September 14 attack on Saudi Arabia’s oil refineries, the main oil brands were completely corrected for two weeks and returned to this August lows. The reason for it was the risk of a slowdown in global economy and a decrease in demand for oil.

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

Earlier, oil market assessment was made with a focus on the growth of optimism and the possibility of attempts of growth. It is worth noting that in the current situation, after a significant impetus to growth, which, of course, did not have a long-term effect on the market in the form of supply disruptions from Saudi Arabia, the oil market could maintain an upward trend. At the same time, this upward dynamics could serve as an occasion for the formation of an uptrend.

But now it is worth to note that such a rapid downward correction after growth indicates the prospects for a further decline than the growth that was discussed earlier. The reason for the decline in oil prices remains fears of a decline in demand due to a decrease in the global economy.

Despite the relative calm in the trade war, the actual consequences of the trade conflict began to manifest themselves, as indicated by the slowdown in business activity in the US and Europe. This is regarded by the market as a signal to the actual demand for oil and indicates a slowdown in the largest economies in the world.

OPEC and IEA forecasts for oil consumption in 2020 have also narrowed due to existing risks. A relative decrease in tension in the Middle East in the light of these events puts an additional pressure on the oil market.

Technically, the major oil brands maintain lateral dynamics, limiting from below to the lows of the current year June and August. Updating the lows against the background of pessimistic prospects will serve as a clear signal for the continuation of the decline.

BRENT crude oil is limited from below to support levels: 56.00 and 55.00. The breakdown of which will indicate an acceleration of the decline and with a high probability will open the way to the lows of the end of 2018 and early 2019. The resistance marks are: 60.00 and 62.00. The dynamics of the BRENT brand remains more prone to decline than WTI,  due to geopolitical risks and the growth of supply from OPEC.

The WTI oil brand is limited from below to support levels: 51.00 and 50.00, which limit the decline to the lows of recent years. Resistance is located at the levels of 55.00 and 57.00. The overall dynamics of the WTI brand is less prone to decline and remains limited by the side channel, the upper border of which is limited by the levels of 59.00 and 61.00.

Anton Hanzenko