The positive impulse was caused by the comments made by Saudi Arabia Minister of Energy, who said last weekend that countries participants of the OPEC+ were ready to continue limiting oil extraction. Right now, the countries members of the OPEC+ are obeying the agreement that limits daily oil extraction. So far, the agreement was considered to be valid in the first half of 2019, but now it is clear that it will be extended until the end of the year or maybe even longer.
Investors are not expecting any oil shortages, but it’s better to avoid oversupply, which already took place at some moments of this year, as well. For this purpose, the commodity market has the USA with their glut of shale oil production.
Right now, there are strong fundamental factors on the commodity market, which are supporting the positive impulse in Brent. First of all, we’re talking about the US sanctions against Iran and Venezuela – reduction of oil extraction in these counties leads to oil prices growth. Limitations set by the OPEC+ are also in favor of bulls. In opposition, the demand for oil is a little bit decreasing due to slowdown in global economy growth, mostly because of trade wars between the USA and China.
As we can see in the H4 chart, after breaking 72.25 upwards, Brent may continue growing to reach 74.50. Also, the pair has tested the broken level from above. Right now, is trading to rebound from it to the upside and consolidating above 72.25. Possibly, the price may update 73.73 and then form a new descending structure towards 72.50. After that, the instrument may start a new growth with the short-term target at 75.50. This scenario is confirmed by Stochastic Oscillator, as its signal line is steadily moving upwards. However, this scenario may be no longer valid if the pair breaks 72.00 downwards. In this case, the correction may continue to reach 68.00.
In the H1 chart, Brent is steadily growing towards 73.73. Possibly, the pair may reach it and then start a new correction with the intermediate target at 74.50. Later, the market may consolidate around this level and then resume growing to reach 76.50. This scenario is confirmed by Stochastic Oscillator, as its signal line is reversing and moving upwards to reach the “overbought area”. However, this scenario may be no longer valid if the pair breaks 72.00 to the downside. In this case, the instrument may continue the correction towards 68.00.
By Dmitriy Gurkovskiy, Chief Analyst at RoboForex
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.
This article was originally posted on FX Empire
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