Brent Crude Updating Lows

Author: Dmitriy Gurkovskiy, Chief Analyst at RoboForex

Brent crude prices continue updating their multi-month lows. On Tuesday, November 13th, a barrel of Brent costs $68.51 USD, having lost more than 2%. As a result, “black gold” is currently trading near the levels it reached on April 9th this year.

The main reason why the oil prices are falling right now is a quick strengthening of the US currency. At the moment, EURUSD is trading close to the lowest levels over the last 18 months due to the liquidity absorption processes in the US financial system. The Federal Reserve continues to retire treasury bonds. Refinancing is not the case here, as the FRS just withdraws huge amounts of money from the monetary system, thus making the USD stronger and influencing costs of other assets.

Apart from the pressure that comes from the USD, the oil market is filled with other “bearish” news. The Baker Hughes Oil Rig Count report published on November 9th (+12 units) and rumors about the OPEC’s readiness to decrease crude oil production in order to stabilize commodity prices have already been included into quotes. As for facts that are already known, it’s Saudi Arabia’s strategy to reduce BOPD (Barrels Of Oil Per Day) in November and December.

At the same time, oil extraction and production in the USA are quickly growing, as can be seen in the weekly reports that show oil refinery plants utilization and the increase of oil reserves. For the companies involved in shale oil production, the current prices are pretty comfortable. It appears that the “bearish” tendency in the oil market may get even stronger.

As we can see in the daily chart of Brent, the descending impulse has broken the support line of the previous rising channel, which means that the current long-term tendency may change. In addition to this, one should note that the previous uptrend has been corrected by 38.2% and the price may continue trading towards the retracements of 50.0% and 61.8% at 65.83 and 60.80 respectively. The key downside target may be the support line of the projected channel at 60.80.

The H4 chart of Brent shows that the price is steadily trading inside the same channel, thus indicating a stable trend. At the same time, there is a convergence at MACD, which may indicate a possible ascending correction in the nearest future. A signal to start this correction may be either “Golden Cross” at MACD or breakout of the current resistance line at 72.00. The key correctional targets may be the retracements of 38.2% and 50.0% at 75.40 and 77.63 respectively.

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.