Oil: the Price has increased, but the risk of falling below $60 high

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The external geopolitical situation has developed in such a way that the global oil market once again lost promising targets in terms of growth.
After the Federal reserve signal a possible easing on interest rates, which could mitigate the negative effect of the trade conflict between the US and China, but was later dampened expectations for further reduction of the key rate, which seriously influenced the participants in the commodity markets.
In fact, the Federal reserve sought to protect the U.S. economy from possible risks, including those associated with the trade war and the possible slowdown in economic growth. But this does not mean that the fed is beginning to apply a strategy planned to further reduce the base rate.
The hope that China will take positive action on trade deals with the United States unlikely. At least up to the 1st of September they have.
New and more stringent round of trade wars, which may begin in September, raises even more concerns among market participants.
The oil market is very sensitive to political background as the participants in the commodity markets are not willing to work with high risk, despite the fact that the decline in oil production by OPEC countries+ peaked over the last 8 years.
In addition, the OPEC countries at the next its meeting will offer even greater increase in quotas for oil production decline, which in principle was expected because the OPEC countries have not fully considered the geopolitical effects of trade wars that a significant impact on the oil market.
If initially the reduction of oil production by OPEC countries+ was regarded as a temporary measure, the current prevailing conditions it is a necessity.
However, for medium-term decisions on oil market, major investors and market participants will also focus on the publication of data on crude oil inventories from the energy agencies of the United States this week.
While maintaining all other conditions the price of oil will be traded at the level 63,20 – of 64.00 dollars per barrel of Brent, while us shale crude oil prices will trade within the $ 56 per barrel.
As we have seen a significant growth driver of oil prices is not observed. In the short term the price of oil will be under pressure and could decline further to 60.00 per barrel for Brent. The American WTI has the potential to reduce to 54.00 per barrel.
Gaidar Hasanov
“International financial center”