While the oil market is following closely the restart of the refineries, the dynamics of US reserves and the impact of hurricanes Harvey and Irma, OPEC is beginning to return investor attention to its person. Citing sources who are familiar with the matter, Bloomberg said in August the cartel reduced production by 109, 000 b/d.
Increased activity is shown by Saudi Arabia, which not only discussed with Venezuela the possibility of extending the agreement on the reduction of production beyond March 2018, but also issued a rather optimistic forecast for the second half of this year. According to Riyadh, along with a decrease in production by 1.8 million b/d compared with the level of October 2016, an increase in global demand to 2 million b/d will benefit the oil market. These factors make it possible to count on a reduction in world reserves, which currently are 219 million barrels higher than the average for the last 5 years and amounts to, according to the International Energy Agency, 3.02 billion barrels.
However, Saudi Arabia's charity begins at home. The U.S. forecast growth of their own reserves by 2.3 million barrels by the end of the week by September 8 after the first increase in the last two months by 4.6 million barrels. It should be noted that the turn of the trend can go faster: Goldman Sachs predicts that US inventories will jump by 40 million barrels in the next few five-day periods amid a contraction in demand for 900,000 b/d in September and 300,000 b/d in October. At the same time, the destructive power of Harvey's influence on the US oil market will be higher than that of Irma, as Texas per capita consumes twice as much oil as Florida. Capital Economics agrees with the view of Goldman Sachs. The company compares both hurricanes with Katrina, under the influence of which, in 2005, demand fell by 2% y/y over the next three months.
Thus, the American market is full of internal negative factors, which forces speculators to increase short positions on Brent. Long positions in the week to September 5 remained virtually unchanged, which somewhat reduced net long positions. Nevertheless, the indicator continues to stay near the maximum mark since May.
Dynamics of speculative positions for Brent
Source: Bloomberg.
Further dynamics of Brent and WTI will depend on the speed of the refineries' restart and on the dynamics of US stocks. If the pessimistic forecasts of Goldman Sachs and Capital Economics are not justified, and oil refining will rebound much faster than it is commonly believed in the market, then futures can continue the upward trend. Moreover, the slowdown in the US economy in the third quarter under the influence of hurricanes can affect the plans of the Fed and will shift the time frame for raising the federal funds rate for the second half of 2018, which will weaken the US dollar.
Technically, the return of Brent prices to the resistance at $ 54.7 per barrel with the subsequent successful push will increase the risks of continuing the rally in the direction of the target by 161.8%, 200% and 224% on the AB = CD pattern.
Brent, daily chart
