Oil approached the line of demarcation

After the rapid July rally, the oil market enters a state of consolidation. Encouraged by the decline in US stocks over a period of seven of the past eight weeks by a total of 21 million barrels, the bulls are confident at the current levels, but new buyers are not in a hurry to join the uptrend, as rumors are circulating in the market that the level of $ 50 for the barrel by WTI is a kind of demarcation line. Above it, producers from the States will actively hedge supplies for 2018. Citigroup warns its customers that they have already begun to do so.

By the end of the week, hedge funds had increased their net long positions for the Texan brand by 18%, to 282,362 contracts, which is the highest mark in more than three months. Net lows for Brent grew at the fastest rate (+53 777 contracts) from December as positive news from the US and OPEC arrived.

Dynamics of WTI and speculative positions on oil


Source: Bloomberg.

Along with the reduction in US stocks, support for black gold is provided by information on the reduction in Saudi Arabia's supplies to its Asian customers. Riyadh begins to fulfill its commitment to reduce exports in St. Petersburg, wishing to set an example for the rest. In this respect, the meeting of representatives of the cartel at the end of the week by August 11 gives hope for a change in the situation for the better. According to the International Energy Agency, June OPEC lowered extraction only 78% of the set volume Viennese contract that is "bear" factor for Brent and WTI. It is possible that after Abu Dhabi, the situation will change for the better.

Optimism "bulls" for oil attached a weak dollar and a reduction in drilling rigs from Baker Hughes. "American" has consistently failed to regain a positive GDP for the second quarter and a strong statistics on employment in July. In the market, there are rumors that the end of September, under pressure from problem debt ceiling, he will not be able to grow. Fans of the currency remained hope for release of inflation data, but if the market turned a deaf ear, the USD index drop could accelerate that will provide invaluable assistance to Brent and WTI.

At the same time, American inventories fell by less than on July 28, analysts expected Reuters, which somewhat stifled the fervor of buyers, and China imported the smallest volume of black gold in July in the last 6 months. Thus, there is a hidden negative the market, which can become a reason for a rollback in case of an unpleasant surprise from the US Energy Information Administration. According to forecasts of Bloomberg experts, by the end of the five-day period by August 4, reserves will decrease by 2.1 million barrels.

Technically, Brent entered the consolidation range of $ 51-52.9 per barrel. Without an exit of quotations for its limits, it is very difficult to talk about restoring an uptrend or correction. The nearest support levels are near the $ 51.7, $ 51.05 and $ 50.1 marks.

Brent, daily chart


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