Following Wednesday’s release of the data on oil and oil products inventories in the USA, the price of Brent fell from the highs of Wednesday at the level of 65.30 to 62.45. However, closing price of Wednesday was equal to the opening price of the day at the level of 63.60. At the Asian session on Thursday, quotes of the oil futures slightly fell down. By the opening of the European session Brent was traded at the level of 63.40.
Despite the reduction of the commercial oil inventories in the USA by 2.7 million barrels and US Fed’s restrained assessment of GDP growth and interest rates in the country, oil is also under pressure from several factors, such as the increasing production of oil in the world and the rise in exports in the countries of the Asian region and the decrease of oil import in China. Recall that at the last meeting of OPEC the level of oil production has remained has not been lowered.
In addition to the existing oil production in the world, production of oil in Iran can begin. If by the end of the month the nuclear program agreement is reached, sanctions on Iran will be lifted and the country will be able to increase the volume of oil exports.
Following market volatility related with expectations of the increase in interest rates by the US Fed and the meeting of OPEC, the price of oil will continue to be under pressure in the medium-term.
Support and resistance
Downtrend of this week continues. On the daily chart resistance levels are 69.60 (ЕМА200) and 66.00 (ЕМА144). Support levels: 63.50 (ЕМА50), 62.80 (Fibonacci 23.6%), 62.30 (the bottom line of the ascending corrective channel). If the price returns to the downward channel, the target can be at the level of 59.00–58.50.
On the daily and four-hour charts the indicators OsMA and Stochastic are in the neutral zone.
Support levels: 61.95 and 62.80.
Resistance levels: 66.00, 67.50 and 69.60.
Short positions are recommended if the price breaks down the levels of 62.80 and 62.30 with the targets of 61.20, 60.00 and 59.00. Alternative scenario is possible if the price breaks down resistance level of 66.00 (ЕМА144). In this case the target will be the level of 69.60, and if the trend continues — 72.70 (Fibonacci 38.2%).