While the US Energy Information Administration and the International Energy Agency scare oil fans with their forecasts for 2018, the “bulls” in the North Sea variety are building up their net long positions to new highs. According to ICE Futures Europe, by the end of the week on December 12, the figure had already reached a record level of 544,051 contracts amid a reduction in black gold reserves in the States and a pipeline accident in the North Sea. Rumors of a strike in Nigeria and a surprise from Baker Hughes in the form of lower drilling rigs to 747 allowed Brent to fly above $ 65 per barrel. However, while this is true, we don’t expect it to last long.
Dynamics of speculative positions and oil prices
Source: Bloomberg.
According to forecasts of the US Energy Information Administration, shale production will grow by 94 thousand bpd and reach 6.41 million bpd in January. Meanwhile, the cumulative production of black gold will increase next year to a record 10.02 million bpd. In the opinion of the IEA, US companies enjoy favorable conditions, in particular high prices, and continue to actively increase production. The International Energy Agency argues that one should not expect the 2017 successes to be repeated in 2018. Global reserves due to the US factor will decline more slowly than in the current year. So, in January-June the market will be in a surplus of 200 thousand bpd, which will be replaced by a deficit of 200 thousand bpd in July-January.
According to the IEA, commercial oil reserves in industrialized countries fell by 40.3 million barrels in October. By early November, the figure was at 2.9 billion barrels, which is 111 million more than the average for the last 5 years of the indicator for this time of year and is the lowest value since July 2015.
However, if the number of drilling rigs from Baker Hughes declines, and American reserves, according to forecasts of Bloomberg experts, are ready to mark a fall for the sixth week in a row, which is the longest series since July, then there is clearly something wrong with the market. Either production does not grow as fast as it is said or demand is unexpectedly strong for a given time of the year. Both factors are “bullish” for Brent and WTI.
In the meantime, large banks are making their forecasts at an average price of both varieties in 2018. The most enthusiastic “bulls” are Goldman Sachs and JPMorgan, which rely on the will of the OPEC and other countries participating in the agreement to reduce production. The first bank expects an increase in the average price from the current $ 54 to $ 62 per barrel. In contrast, Citi Group and Barclays see Brent at $ 54-55 per barrel on the back of an increase in the volume of supplies outside the cartel.
Technically, if the “bears” in the North Sea variety can win back the reversal pattern “Expanding wedge” and storm with the support level of $ 60.75, the risks of corrective movement in the direction of $ 59.5 and $ 58.3 per barrel will increase significantly. The growth potential of Brent quotes looks limited to 161.8% on AB = CD. It corresponds to $ 66.95.
Brent, daily chart
The material has been provided by InstaForex Company – www.instaforex.com
While the US Energy Information Administration and the International Energy Agency scare oil fans with their forecasts for 2018, the “bulls” in the North Sea variety are building up their net long positions to new highs. According to ICE Futures Europe, by the end of the week on December 12, the figure had already reached a record level of 544,051 contracts amid a reduction in black gold reserves in the States and a pipeline accident in the North Sea. Rumors of a strike in Nigeria and a surprise from Baker Hughes in the form of lower drilling rigs to 747 allowed Brent to fly above $ 65 per barrel. However, while this is true, we don’t expect it to last long.
Dynamics of speculative positions and oil prices
Source: Bloomberg.
According to forecasts of the US Energy Information Administration, shale production will grow by 94 thousand bpd and reach 6.41 million bpd in January. Meanwhile, the cumulative production of black gold will increase next year to a record 10.02 million bpd. In the opinion of the IEA, US companies enjoy favorable conditions, in particular high prices, and continue to actively increase production. The International Energy Agency argues that one should not expect the 2017 successes to be repeated in 2018. Global reserves due to the US factor will decline more slowly than in the current year. So, in January-June the market will be in a surplus of 200 thousand bpd, which will be replaced by a deficit of 200 thousand bpd in July-January.
According to the IEA, commercial oil reserves in industrialized countries fell by 40.3 million barrels in October. By early November, the figure was at 2.9 billion barrels, which is 111 million more than the average for the last 5 years of the indicator for this time of year and is the lowest value since July 2015.
However, if the number of drilling rigs from Baker Hughes declines, and American reserves, according to forecasts of Bloomberg experts, are ready to mark a fall for the sixth week in a row, which is the longest series since July, then there is clearly something wrong with the market. Either production does not grow as fast as it is said or demand is unexpectedly strong for a given time of the year. Both factors are “bullish” for Brent and WTI.
In the meantime, large banks are making their forecasts at an average price of both varieties in 2018. The most enthusiastic “bulls” are Goldman Sachs and JPMorgan, which rely on the will of the OPEC and other countries participating in the agreement to reduce production. The first bank expects an increase in the average price from the current $ 54 to $ 62 per barrel. In contrast, Citi Group and Barclays see Brent at $ 54-55 per barrel on the back of an increase in the volume of supplies outside the cartel.
Technically, if the “bears” in the North Sea variety can win back the reversal pattern “Expanding wedge” and storm with the support level of $ 60.75, the risks of corrective movement in the direction of $ 59.5 and $ 58.3 per barrel will increase significantly. The growth potential of Brent quotes looks limited to 161.8% on AB = CD. It corresponds to $ 66.95.
Brent, daily chart
The material has been provided by InstaForex Company – www.instaforex.com
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