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    Technical Analysis #C-BRENT : 2016-03-30

    Further rise in US oil stocks expected

    Brent oil prices are correcting down after increase by around 45% since mid-February. Market participants doubt that OPEC and independent oil producers will agree on production “freeze” on their meeting due on April 17. Will Brent oil prices continue declining?

    At once several oil producers said they were not projecting limiting oil production yet. Iran even noted it was planning to increase production by 1mln barrels a day to 4mln. Saudi Arabia and Kuwait said they had plans for commingled production of 280-300 barrels a day on Khafji field which was shut in 2014. Russia is planning to increase the oil exports in Q2 2016 year by 200 thousand tonnes compared to Q1. Nigeria and Venezuela are also minded to increase production. Meanwhile, China is the only country to show the steadily growing demand for oil thus far. Its imports rose by 7.3%, or 2.3mln tonnes, in March compared to February. The US demand for oil is increasing much less amid the economic slowdown. As a result, the US stocks have been rising for the 7th consecutive week. Fresh data will be released at 16:30 CET on Wednesday. Analysts expect the US oil supplies to augment by 3-3.2mln barrels. Additionally, the USDA projects the average Brent price at $34 a barrel this year while the current oil price is a bit higher at $38 a barrel.

     

    Brent

    On the daily chart Brent: D1 has hit a fresh 13-year low this mid-January and then rebounded almost by 45%. Now its prices are edging lower once again. The MACD and Parabolic indicators give bearish signals. The RSI is falling from the level of 70 and has formed the negative divergence, having reached the level of 50. The Bollinger bands have widened slightly which means moderate volatility. The bearish momentum may develop in case the oil prices dip below the last fractal low, the Parabolic signal and the support of the uptrend at 38.6. This level may serve the point of entry. The initial risk-limit may be placed above the Parabolic signal and the last fractal high at 42.9. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 42.9 without reaching the order at 38.6, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

     

    Position Sell
    Sell stop below 38.6
    Stop loss above 42.9

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