The price of a barrel of Brent last week fluctuated in a rather narrow range around the $ 65.5 mark – these are quite comfortable levels even for 2019, and significantly higher than most forecasts for this year. In general, the situation on the oil market can be called quite comfortable – in the absence of strong negative events related to demand, oil prices can stay at comfortable levels for a very long time.
Has the oil price reached its growth limit in the current environment? What risks are most likely on the oil market now? The Fortrader issue was commented on by Alexander Kuptsikevich, an analyst at FxPro.
– The rally in oil quotes since the beginning of November has overheated the price by March, which turned into a natural correction from the peak levels. The price corrected 15% from the peak to the bottom of the local correction after which it received support many times. Further, we saw local maneuvers of bulls and bears, but the subsequent lows were higher than the previous ones, and the local highs were higher and higher.
The signal level of support was the 50-day simple moving average line, the downturns to which attracted buyers and pushed the price up. This line itself is directed upwards, which caused the upward trend. The 50-day moving average is the mid-term trend line, which is clearly bullish right now.
In general, we believe that oil has a high chance of growing further very high. The March pullback knocked overheating off the market and cleared the way for further growth. The next significant range is seen in the $ 70-75 area. However, you need to understand that a very confident recovery of the largest developed economies and the preservation of soft monetary conditions can send the price in search of a “ceiling” at $ 85 by the end of the year – the area of 2018 highs.
It is enough to look at the dynamics of prices for metals and agricultural commodities to understand that the rally in prices for raw materials can go much higher than it seems rational and comfortable for the majority.
On the risk side, it is worth paying attention to the comments of the representatives of Russia and Saudi Arabia. Russia tends to push the idea of raising production quotas when prices rise. This will be good for the ruble and the shares of Russian oil exporters. But at the same time, the increase in production will restrain the rise in oil prices. Unlike metals and agriculture, the supply of oil is artificially constrained, so its quotes have more limited upside potential than, say, copper or soybeans.