Economic theory states that when demand outstrips supply, prices rise. This is exactly the situation in the oil market, which allowed Brent and WTI quotes to add 50% of their value since October. And this is not the limit. According to the IEA, global demand will increase by 5.4 million b/d in 2021 and 3.1 million b/d in 2022, allowing it to fully recover to levels before the pandemic shook the global economy. The indicator will grow until 2026, while there are problems with the supply.
U.S. companies are investing trillions of dollars in wind, solar, and other renewable energy sources, while spending on exploration and production of black gold is declining. Last year, according to Wood Mackenzie estimates, they fell by $330 million, and in 2021-2022 will increase very modestly. It seems that the United States is no longer a competitor to OPEC+, which plans to gradually increase production. The cartel expects global oil demand to grow by 5 million b/d in the second half of this year, so at the alliance's next meeting on July 1, there is a high probability of a further increase in production in August and the following months. Nevertheless, this does not frighten the "bulls" for Brent and WTI: while the IEA calls on mining companies to open the taps, such decisions of OPEC+ only convince that the market is all right, it is still in the grip of the "bulls".
Dynamics of US rigs and oil prices
From time to time, there are reasons for correction in the black gold market in the form of a deterioration in the epidemiological situation, which threatens the projected dynamics of demand, or the lifting of U.S. sanctions against Iran, which allows us to talk about an increase in supply, but all these are temporary factors that cannot lead to a reversal of the upward trend for Brent and WTI. Similarly, the Energy Information Administration raised its forecast for U.S. shale production in July by 38,000 b/d to 7.8 million b/d. All this is not able to change the outlook of investors who seriously expect that over a long period of time, demand will outstrip supply. Isn't that why speculators are currently the most optimistic about the prospects of the Texas variety over the past 3 years?
Along with the negative in the oil market, there is also a short-term positive periodically. In particular, the information that according to the estimates of the largest Chinese companies, the demand for gasoline in May was higher than in the same month of 2019 by 5%, supported the "bulls" for Brent and WTI. As, however, and the data that in the United States, the number of passengers making air travel, for the first time since the beginning of the pandemic exceeded the mark of 2 million per day.
Technically, the upward march of Brent in the direction of targets by 224% on AB=CD and the "Wolf Wave" pattern, which correspond to the marks of $84.4 and $86.2 per barrel, continues. Formed on the breakout of the upper limit of the consolidation range of $62-$70 or on the update of the March high at $71.3, I recommend holding long positions and periodically increasing them on pullbacks.
Brent, Daily chart
*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.
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