Oil started the week with growth, breaking the mark of 68 dollars per barrel
For the oil market beginning of a new week was very successful. Quotes grew up, after Friday’s decline. In the case of Brent, we observed a return of the price beyond the level 68 and reaching highs in the area 68,80. The day the asset has gained almost 2.5%, although has departed from the daytime peaks to the end of the trading day.
In the raw materials segment have favorable conditions for recovery. This is a technical factors, underpinned by geopolitics. In particular, tensions in Sino-American relations declined a bit after the weekend, the administration trump toned down his rhetoric and made clear that the parties can agree without “military action” on the trade front.
Buyers also inspired by the situation with Syria, which raised the possibility of US withdrawal from the nuclear deal with Iran, and, consequently, the imposition of sanctions against Tehran. The bulls are still impatiently to calculate how many barrels will leave the market in case of re-imposing restrictions on the export of Iranian oil.
This has helped commodities traders to abstract from growth in drilling activity in the United States to a three-year high. Meanwhile, it is a signal of the future development of oil shale mining. Of the negative factors that are now pushed to the background and the conflict between Saudi Arabia and Iran, which may make the split in OPEC and undermine the deal. At least, this opposition will create discomfort in the market as it approaches the June summit in the format of OPEC+. Especially if the front escalate.
As for the near-term Outlook for Brent, despite a local rise, the asset, in our view, remains vulnerable. The next risks: the potential resumption of tensions between the United States and China, which, incidentally, is not yet ready for negotiations, return of the demand for the dollar, which had sunk against the majority of currencies; today’s API data, which may reflect the increase of energy reserves. Thus, if in the raw materials segment outweigh the negative expected return quotations, under the mark of 68.
In early trading, Brent develops an upward correction and is testing the level 69, sighing with relief after his speech, the Chinese President, XI Jinping, did not stir up trade rhetoric. This means further attempts to lift its continuing interest in risk.
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