The price of Brent crude during the trading session on Thursday for the first time since March exceeded $ 50 per barrel. Market participants continue to ignore all fundamental risks, relying entirely on news of the release of vaccines from Covid-19, as well as economic stimulus measures that buyers believe will help the global energy market.
In recent weeks, oil prices have mimicked rising trends in stocks and other commodities, driven by an overall improvement in market sentiment amid hopes for a global recovery in 2021. First of all, market participants hope that the early lifting of quarantine restrictions will lead to an increase in the number of car trips in the USA and Europe, and, accordingly, in the consumption of hydrocarbons. They also expect that major OPEC oil producers will continue to comply with agreements to limit aggregate production, even despite the fact that OPEC + countries previously agreed to increase oil production by 500 thousand barrels per day, starting in January 2021.
Many analysts are concerned about a possible increase in oil price volatility, especially amid a slowdown in US gasoline consumption growth. According to government data released on Wednesday, oil inventories in the week of November 28 - December 4 rose by 15.2 million barrels, the most significant increase since April, when stocks rose by 19.2 million barrels in one week. At the same time, gasoline stocks in the reporting week increased by 4.2 million barrels. In other words, the demand for gasoline sank to the lowest level since May.
A rise in oil quotes amid weakening demand indicators could be a signal indicating that the oil market has become another speculative bubble. According to the CFTC, hedge funds and other speculative investors have been increasing their net long position in Brent for four consecutive weeks. In such conditions, any deterioration in the news background can act as a catalyst for the correction, for example, the extension of quarantine measures in Europe or the United States for January next year. With that said, Brent crude retains potential for decline.
Brent SellStop 49.30 TP 47.00 SL 50.10
Analytical reviews and comments to them reflect the subjective opinion of the authors and are not a recommendation for trading. Author Artem Deev is a trader analyst at AMarkets . The social network of traders is not responsible for possible losses in case of using the review materials
