Crude Oil by Solid ECN

[SOLID ECN LLC]

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

 

[SOLID ECN LLC]

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​

 

[SOLID ECN LLC]

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​

 

[SOLID ECN LLC]

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

 

[SOLID ECN LLC]

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​

 

[SOLID ECN LLC]

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​

 

[SOLID ECN LLC]

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

 

[SOLID ECN LLC]

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.

 

[SOLID ECN LLC]

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.

 

[SOLID ECN LLC]

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