Bears Dominate Bulls on Oil

By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

Last Friday, Brent touched $52.79 USD, the bottom it last reached on September 3, 2017. Early in the final week of December, the instrument recovered a little bit and right now is trading around $54.16 USD per barrel. However, investors don’t seem to be ready for a proper rebound in oil prices.

The Baker Hughes Oil and Gas Rig Count report published on Friday showed 1,089 units, an increase of 7 from the previous number. If taken separately, the number of oil rigs added 10 units after the weak statistics the week before, while the number of gas rigs lost 1 unit. The actual readings seem like a real bearish driver.

Still, investors started selling oil long before the US Federal Reserve announced its intentions to keep the monetary policy almost intact: there would be two rate hikes in 2019 instead of three, based on projections. As for the rest, the regulator held its ground even considering a huge pressure coming from the White House.

Investors’ concerns are understandable. Further rate hikes may be difficult for business, which is already tired of competing for both market niches and manpower. Reduction of business activity will surely influence production numbers and slow down the country’s GDP. Moreover, decreased production numbers will result in low interest in energies – this is what puts additional pressure on oil prices.

Analyzing Brent movements over the last several months, one can assess the current situation and reflect on further potential of the mid-term downtrend. As we can see in the daily chart, after testing the projected support line for a while, the price managed to break it and reached the retracement of 50.0%. Next possible downside targets may be the retracements of 61.8% and 76.0% at $50.05 and $41.48 respectively. One should note that 41.48 is the support level of the second projected channel. Probably, after reaching this level, the instrument may start a new pullback towards the resistance line at $59.90.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboForex shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Having majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.