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Crude Oil Market Analysis

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Last Tuesday, May 31, the leaders of the countries of the European Union agreed on the sixth package of economic sanctions, which included an embargo on the import of two-thirds of Russian "black gold". Against this backdrop, Brent Crude Oil quotes reached new highs around 122.

The new restrictive measures include a ban on the import of energy resources transported by sea, but do not affect supplies to Hungary through the Druzhba pipeline. Officials also said that by the end of the year they would refuse 90% of Russian oil imports, in exchange for which the EU plans to purchase energy carriers in Asia and Arab countries, as well as in the United States, but it will take time to adjust to new logistics. Due to the artificially limited supply on the black gold market and the growing demand for raw materials in Europe, Brent Crude Oil quotes showed a rapid increase and stopped at around 122.00 this week, updating the high of March 24.

Now the trading instrument is correcting in anticipation of the OPEC+ meeting, which will discuss the possibility of adjusting the production of "black gold" against the backdrop of the continuation of a special military operation in Eastern Europe, initiated by the Russian authorities, as well as its consequences for the energy market. Participants are expected to continue to adhere to the current 432K barrels per day production recovery plan, despite the EU authorities' decision.

Meanwhile, Saudi Arabia is ready to increase the production of "black gold" if it suddenly needs to compensate for the falling volumes from the Russian side. In turn, the United States offered Saudi Arabia to increase energy supplies to the EU and exclude Russia from the OPEC+ deal in exchange for unblocking arms supplies, but official Riyadh did not agree to take this step.

Summing up, one can conclude that if the increase in the rate of oil production by OPEC+ countries occurs according to a pre-approved plan, then prices will continue to rise in the future due to increased demand and insufficient supply. However, if a decision is made on an emergency adjustment in order to replace volumes of Russian oil, the instrument may head towards 100 in the long term.

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The long-term trend is upward. After updating the March 24 high, the price decreases and approaches the support level of 114.50, and if it is held by the "bulls", the growth will continue with the target at the May high. Otherwise, the correction will continue to the level of 107.15. The medium-term trend is upward. This week the target zone 2 (118.57–117.67) was broken out, and the next target is in the area of 127.57–126.67. Now the price is correcting and approaching the key trend support at 114.31–113.41, after reaching which new purchases can be considered with the first target at the high of the current week.

Resistance levels: 122, 129, 135 | Support levels: 114.5, 107.15, 101.9

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

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 139.53.

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Brent Crude Oil prices are holding near a 13-week high after China reported higher-than-expected exports in May, but new lockdown restrictions in Shanghai are holding back a faster gain.

For example, China's exports for May increased by 16.9% compared to last year, as the easing of restrictions related to the COVID-19 epidemic allowed some factories to restart. It was the fastest rise since January this year and more than doubled analysts' expectations of 8.0%. Imports also rose by 4.1% YoY, doubling the forecast of 2.0%. New social restrictions have been introduced in some areas of Shanghai. So, in Minhang, where about 2M people live, authorities asked residents to stay at home for two days to control the spread of the virus. At the moment, operational measures are being taken to avoid crowds and testing in places where cases of infection are recorded.

Meanwhile, in the US, there is an increase in commercial oil inventories, which casts doubt on further price increases. According to the Energy Information Administration of the US Department of Energy (EIA), the figure rose by 2.025M barrels, despite the forecast for their decline by 1.917M. According to the World Bank report, oil prices added 350% in two years alone, showing a record increase in two years period since 1973. The upward dynamics continue against the background of the escalation of the military conflict in Ukraine. Experts predicted that quotes would add up to 42% compared to the same period last year but already in 2023, the dynamics will correct, and there will be a decline of 8%, and in 2024 – by 13%.

Thus, we can conclude that if restrictions in China regarding COVID-19 weaken and the demand for gasoline and petroleum products grows due to the summer season, oil prices will continue to strengthen with an immediate target of 129.

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The long-term trend is upwards. This week, the price consolidated above 120, and the next target is 129, the breakout of which will allow the instrument to reach the area of 135. The key trend support is at 115.20. The RSI indicator is approaching the overbought zone, but it still allows considering trades along with the current trend.

The medium-term trend is upwards. After the breakdown of the target zone 2 (118.57–117.67) last week, the growth target was zone 3 (127.57–126.67). Long positions may be opened on the correction from the key trend support 117.14–116.24.

Resistance levels: 129, 135 | Support levels: 122, 115.2

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OPEC's ability to increase production has been exhausted.​

Yesterday, OPEC Secretary General Mohammed Barkindo said that the cartel was running out of opportunities to increase the production of "black gold." According to the official, the production capacities of the participating countries, except for two or three states, are at their peak, and in this situation, there are practically no opportunities to influence the rise in prices. Barkindo added that the market could expect even more turmoil as China recovers from a new wave of the coronavirus pandemic and boosts demand significantly. He also called for increased investment in the oil and gas sector, although the US authorities have previously called for a stop to financing fossil fuels, switching to renewable energy.

During the hearings of the US Committee on Foreign Affairs, US State Department Senior Energy Security Adviser Amos Hochstein expressed concern that India had increased its purchases of Russian oil from 100K barrels per day to 800K and urged official New Delhi to curb this trend, despite strong dependence on supplies. One of the main reasons for the observed dynamics is a significant discount for the Urals brand relative to the oil price for Brent Crude Oil. According to the official, if the country refuses to import resources from the Russian Federation, then there will be no other buyer for them, so these purchases will not look like a blow to European and American consumers who have already refused to cooperate with the Russian authorities under the sixth economic package sanctions.

Thus, there are almost no factors that can put pressure on the asset's quotes on the market now, in connection with which many experts spoke about the possibility of oil prices rising to 150 dollars or more by the end of 2022.

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After the breakout of the upper border of the Triangle pattern, the price works out a signal to open long positions. At the moment, indicator Alligator's EMA oscillation range is actively expanding upwards, and the histogram of the AO oscillator is forming rising bars high in the buying zone.

Resistance levels: 122.2, 130 | Support levels: 113.8, 97.5​
 
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Crude Oil, decline on expectations of the "hawkish" rhetoric of the US Federal Reserve
Previously, experts predicted that the US regulator would raise rates by 50 basis points at a meeting on Wednesday, but after the release of strong data on the consumer price index for May last Friday, more investors expect a change of 75 basis points, which puts pressure on stock positions and oil. Last month, the inflation in the US accelerated from 0.3% to 1.0%, which exceeded the average market forecasts of 0.7%. The value has renewed 40-year highs, reaching a new peak at 8.6% YoY, while in April, the growth was 8.3%.

Additional pressure on the oil quotes is exerted by reports that the chairman of the US Senate Finance Committee, Ron Wyden, plans to pass a law establishing a 21% income tax on excess profits of oil and gas companies with an annual income of more than 1B dollars, which analysts perceive as excessive in these conditions.

From an even stronger fall, the trading instrument is kept by reports that Libya has almost completely stopped oil production due to the political crisis in the east of the country. Market losses are estimated at 1.1M barrels per day, although last month's production averaged 1.2M barrels per day. Libyan Oil Minister Mohammed Aoun said that almost all fields are currently closed. In turn, the limitation of oil production leads to a lack of supply, which, against the backdrop of high demand, does not allow prices for Brent Crude Oil to fall below 120.

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The long-term trend is upwards. In early June, the support level of 120 was broken, around which the price is now correcting, and long positions with the target of around 129 may be opened here. The medium-term trend is with the target in zone 3 (127.57–126.67). Now the price is heading for a correction towards the area of the trend's key support at 117.63–116.76, after reaching which, long positions with the first target at the current week's high at 126.20 may be opened.

Resistance levels: 129, 135 | Support levels: 121, 115.2, 107.15

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Crude Oil, prices for "black gold" are slightly reduced​

During the Asian session, Brent Crude Oil prices are traded in different directions, consolidating near 117.00. Yesterday, the instrument moderately declined in response to the publication of macroeconomic statistics on energy reserves, which slightly eased experts' fears regarding oil supply on the market.

In particular, the International Energy Agency (IEA) report indicated an increase in commercial oil reserves worldwide by 77M barrels in April compared to March. The positive dynamics were confirmed by the Energy Information Administration of the US Department of Energy (EIA) statistics: as of June 10, the indicator rose by 2M barrels, while analysts expected it to decrease by 1.3M barrels. The overall level of oil production in the United States also increased by 100K barrels per day to a combined level of 12M barrels per day. The OPEC report reflects that demand from market participants remained around 3.4M barrels per day, amounting to 100.3M barrels per day. The cartel is confident that the resumption of scheduled air travel after the coronavirus pandemic and the elimination of disruptions in supply chains will maintain positive momentum.

In turn, quotes continue to be supported by the prospect of a decrease in oil supply on the market with a moderate increase in consumption. Thus, the export of resources from the Russian Federation is currently difficult since Western countries are actively introducing new blocking sanctions against the Russian economy in response to a special military operation on the territory of Ukraine. Analysts note that the decline in the production of raw materials in Russia will be compensated by the growth in production in the Middle East and the United States, but only partially.

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On the daily chart, Bollinger bands reverse into a horizontal plane: the price range remains practically unchanged, reflecting the flat nature of trading in the short term. The MACD indicator is falling, keeping a strong sell signal (the histogram is below the signal line). Stochastic shows similar dynamics, approaching its lows and indicating that the instrument may become oversold in the ultra-short term.

Resistance levels: 120, 123.24, 125.85, 128.6 | Support levels: 116, 114.09, 112, 109

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Crude Oil: prices are recovering after a sharp decline last week​

Quotations are supported by data indicating growing imports of oil and oil products from China. According to the report of the General Administration of Customs of China, "black gold" from Russia is sent to the country both by sea and through the Eastern Siberia–Pacific Ocean pipeline. In May, deliveries reached 1.98 million barrels per day, which was a record value, exceeding the April figure by a quarter, while for liquefied gas this figure was fixed at around 400 thousand tons, adding 56% compared to May 2021. Analysts note that the discount policy adopted by Russian officials against the backdrop of sanctions imposed after the start of the military conflict in Ukraine contributes to the increase in imports.

Investors expect that the recovery of the Chinese economy will contribute to a further increase in demand for petroleum products, which will support prices at current levels or contribute to their growth. In turn, fears about possible interruptions in Russian supplies to Western countries still persist. By the end of this year, the EU intends to significantly reduce the volume of imports of oil from the Russian Federation, and then to find alternative sources altogether.

In the near future, investors expect the publication of statistics from the American Petroleum Institute (API) on the dynamics of "black gold" reserves for the week ended June 17. The previous report showed a weak increase of 0.736 million barrels, which, however, put additional pressure on the quotes.

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Bollinger Bands in D1 chart demonstrate flat dynamics. The price range is expanding, while remaining spacious enough for the current activity level in the market. MACD is going down preserving a stable sell signal (located below the signal line). In addition, the indicator is testing the zero level for a breakdown. Stochastic, having approached the level of "20", reversed into a horizontal plane, indicating the growing risks of oversold instrument in the ultra-short term.

Resistance levels: 114.09, 116, 120, 123.24 | Support levels: 112, 109, 106, 102.57

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Crude Oil - prices retreated to new local lows
The trading instrument is under pressure from the rhetoric of US Federal Reserve Chairman Jerome Powell, who, during a speech in the Senate Committee on Banking, Housing and Urban Affairs, announced the continuation of the "hawkish" course of the regulator regarding the adjustment of interest rates to combat record inflation. At the same time, experts are worried that too sharp tightening could provoke a recession in the national economy. In June, the department decided to raise the rate by 75 basis points, and now analysts are trying to predict how the rate will change during the July meeting. A similar situation is developing in other countries: thus, this month, the Bank of England raised the rate for the fifth time.

Cecilia Rose, chairman of the council of advisers to the head of the White House on economics, noted that the decline in prices for "black gold" could be triggered by increased supplies of Russian energy resources to China and India against the backdrop of the discount policy he presented. In particular, China increased imports by 55% YoY, about 2M barrels per day.

The dynamics of the asset slowed down after the publication of data on stocks of raw materials in the US. Thus, the report released on Wednesday from the American Petroleum Institute (API) reflected a sharp increase in the index for the week of June 17 by 5.607M barrels after an increase of 0.736M barrels over the previous period. The final statistics from the Energy Information Administration of the US Department of Energy (EIA) have not yet been released due to technical problems.

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On the daily chart, Bollinger Bands are steadily declining: the price range is expanding, letting the "bears" renew local lows. MACD falls, keeping a fairly strong sell signal (the histogram is below the signal line). Stochastic reverses into a horizontal plane near 20, signaling that the instrument may become oversold in the ultra-short term.

Resistance levels: 105, 107.67, 110, 113.13 | Support levels: 103, 101.09, 100, 98

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Crude Oil Market Update
Brent oil price shows some bearish bias to hint heading to decline in the upcoming sessions, motivated by stochastic negativity, making the bearish bias suggested for today conditioned by the price stability below 110.10, supported by the negative pressure formed by the EMA50, noting that our main waited target is located at 105.05.

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The expected trading range for today is between 106.50 support and 112.20 resistance.

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Crude Oil - The probability of decline remains.

On the daily chart, the formation of the first wave of the higher level 1 of (1) of C has completed, and a downward correction is observed as the second wave 2 of (1) of C, in which the wave of the lower level a of 2 is developing. At the moment, the wave (i) of a has already been formed, the correctional wave (ii) of a has completed, and the third wave of the lower level (iii) of a is also developing.

If the assumption is correct, the price of WTI Crude Oil will fall to 82.3 – 67. The level of 105.93 is critical and stop-loss for this scenario.

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Crude Oil - Prices hold above 95 dollars per barrel​

Thus, according to the American Petroleum Institute (API) statistics, the indicator decreased by 4.037M barrels, which was four times lower than the analysts' forecast. However, traders are concerned about the possible pressure on the instrument after the increase in interest rates by the US Federal Reserve, whose meeting will be held today. Due to the active strengthening of the dollar, goods denominated in US currency will become more expensive for buyers from other countries.

Nevertheless, prices are supported by the reduction in the supply of Russian gas to the EU countries via the Nord Stream gas pipeline. Yesterday, Gazprom announced that it would be able to ensure the loading of only 20% of its nominal capacity, which could cause an increase in demand for energy resources, including oil, to replenish the missing volumes partially. The subsequent decision of the EU countries to switch to a regime of reducing gas consumption somewhat restrained the growth of quotations.

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Thus, the balance of positive and negative fundamental factors is confirmed by technical analysis. After a decline and an attempt to break through 95.00 in the middle of the month, oil prices stabilized slightly above the indicated level within the range of 97.00–100.00. However, the long-term trend remains upward, so a new wave of growth may develop after the announcement of the decision of the US Federal Reserve on the interest rate. The target zone will be 105.76–103.55.

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The medium-term trend is downwards. Last week, market participants unsuccessfully tried to break through the key trend resistance 100.11–99.25, and as a result, the price returned under it. This week, it is worth considering short positions with the target at the July low of 90.80. The downward scenario will be canceled after the consolidation above 100.11. In this case, long positions with the target at 108.71–107.85 are relevant.

Resistance levels: 103.55, 105.76 | Support levels: 95, 85​
 
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Crude Oil - A fall is possible​

On the daily chart, the first wave of the higher level 1 of (1) of C formed, and a downward correction forms as the second wave 2 of (1) of C, within which the wave a of 2 develops. Now, the third wave of the lower level (iii) of a is developing, within which the wave iv of (iii) and the wave v of (iii) are forming.

If the assumption is correct, Crude Oil price will fall to the levels of 82.3 – 67. In this scenario, critical stop loss level is 103.55.

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Crude Oil - Iranian oil exports catalyze global price decline​

The situation with the export of Iranian oil has a key influence on the development of the negative dynamics of quotations. At the beginning of summer, experts expressed serious concerns about the global demand for fuel when the supply of cheap Iranian raw materials to the world market was resumed, and now, according to the latest statistics, this figure increased by 30% from March 21 to July 22 and reached 870 K barrels per day, the highest value among all producers in Western Asia. This growth was the most dynamic for the country since 2018, when the US withdrew from the nuclear deal agreement, while Iran's oil revenues increased by 481% in the first four months of the current Iranian calendar year.

Also, according to the American Petroleum Institute (API) report, energy stocks in warehouses in the United States decreased by 0.448M barrels against a forecast of 0.117M. Still, the oil reserves held by local companies, according to the Energy Information Administration The US Department of Energy (EIA), fell by 7.056M barrels after rising by 5.458M barrels last week. Such a sharp change could not go unnoticed, and yesterday's growth of quotations testifies to this.

The situation in the oil market is still very tense, and it is already becoming clear that the OPEC+ plan to increase production levels by a symbolic 100 K barrels per day is just a way to assess the situation and not a measure to support prices, so until the next meeting cartel asset quotes are likely to continue to decline.

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On the weekly chart of the asset, the price is moving within the local downward channel and soon may again turn to the downside. Technical indicators confirm this probability, holding a sell signal: fast EMAs on the Alligator indicator are below the signal line, narrowing the range of fluctuations, and the AO oscillator histogram forms multidirectional bars in the sell zone.

Resistance levels: 93.33, 100 | Support levels: 86.41, 78.55​
 
The price of North American WTI Crude Oil is correcting within the uptrend around 93.32.

Since the beginning of the year, the United States has been actively trying to influence OPEC+, persuading it to increase oil production and thereby reduce fuel prices on the world market. Still, the cartel ignores these requirements, forcing the American authorities to reduce national strategic reserves to the lowest level since 1985 of 453.1M barrels. It, in turn, puts pressure on energy carriers: since the beginning of summer, prices have already fallen by more than 20 dollars, but yesterday, the alliance members again stressed that they could correct their dynamics with their intervention. Thus, the head of the Ministry of Energy of Saudi Arabia, Salman bin Abdul-Aziz Al Saud, confirmed that OPEC+ would begin developing a new agreement soon, under which the group intends to reduce production, which will normalize the current situation by reducing volatility. Also, the likely positive decision on the "nuclear deal" with Iran and the entry of cheap oil into the market remains a key factor. Thus, Saudi Arabia once again made it clear that the oil quotes and its supply are under full control, and in case of unforeseen circumstances, the organization is ready to intervene immediately.

Investors perceived this situation with a clear positive, and in the first two days of trading during the week, Crude Oil quotes increased by 8 dollars, reaching 93 again.

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On the weekly chart of the asset, the price left the limits of the local downwards channel, having consolidated above the resistance line. Technical indicators confirm the high probability of continued corrective growth: fast EMAs on the Alligator indicator began to actively approach the signal line, narrowing the range of fluctuations, and the AO oscillator histogram is forming new upward bars, approaching the transition level.

Resistance levels: 96, 102.37 | Support levels: 91.33, 85.3​

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Crude Oil - Reducing US oil inventories makes the prices grow​

Brent crude oil quotes rose above 100 dollars per barrel for the first time since August 12, reaching a resistance level in the 102 area after the publication of US statistics and reports of production cuts by OPEC+ members.

According to the American Petroleum Institute (API), crude stocks fell by 5.632M barrels, well below the forecast of 0.450M barrels and the previous value of 0.448M barrels. A similar report from the Energy Information Agency (EIA) also showed a decline of 3.282M barrels, lower than the forecast of –0.933M barrels but higher than the previous value of –7.056M barrels. Also, the energy quotes are supported by reports that OPEC+ representatives are ready to reduce production if cheap Iranian oil is brought to the market after the signing of the “nuclear deal” by official Tehran and Western countries.

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Against this background, the quotes of the trading instrument went into an upward correction and reached 102, after the breakdown of which the movement will continue to 110. However, the long-term trend is still downwards. If this level is kept, the decline in the asset will increase to the area of 93.55.

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The medium-term trend is down, and the price is testing the border of the corridor of 102.30–101.45. If it is held, the decline will continue with the target at the August low at 93.20. Otherwise, the market expects a trend change to an uptrend, and zone 2 (110.80–109.95) will become the target for purchases.

Resistance levels: 102, 110 | Support levels: 96.24, 93.55​

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Crude Oil - Growth is possible

On the daily chart, the upward wave C forms, within which the first wave 1 of (1) of C developed and a downward correction ended as the second wave 2 of (1) of C. Now, the third wave 3 of (1) has started, within which the first entry wave of the lower level (i) of i of 3 is developing.

If the assumption is correct, Brent Crude Oil will grow to the area of 127.04 – 139.4. In this scenario, critical stop loss level is 92.72.

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