2022-04-05 • Updated
The oil market suffers from the high volatility that makes trading exciting. The volatility is caused by plenty of factors that affect the market every day. If you want to trade oil, you should consider all of them.
Let’s have a look at events that are setting the pace for the oil market now.
It’s all about demand.
The golden rule of the economy: when demand declines, prices go down; vice versa, when demand rises, prices go up. According to the International Energy Agency, a demand growth may decline later this year and into 2019.
1. US-China trade disputes press the oil market a lot.
The US was anticipated to put new tariffs on China on Thursday. Although Mr. Trump is keeping silence, the markets are in suspense. The further escalation of the trade war will affect the Chinese consumption opportunities, as it will hurt the Chinese economy a lot.
2. Emerging markets.
Emerging markets are another significant part of the demand issue. Crises in Argentina and Turkey, weaknesses of EM currencies loom the further demand. If the situation in the markets becomes worse, the countries won’t be able to support the oil demand at the previous levels. As a result, oil prices will go down.
Support, please support.
1. Iranian supply.
After the US announced its willingness to impose sanctions on Iran, the prices surged. The market had been expecting that the short of the supply from Iran will make the market tougher and oil will rise.
US sanctions will come into effect in November, and if Iran and the US don’t come to the agreement before, oil prices will rise further. Although sanctions haven’t come into effect yet, they already affect the Iranian export. Many countries have reduced imports from Iran.
However, as time is passing, we can see that Iran is not giving up easily. Even though the country suffered the biggest output decline, it still tries to negotiate with the European importers to keep the export at the same level. If Iran is able to keep the imports of European countries, the price will react in a negative way.
2. OPEC increases the supply.
Recently, OPEC and non-OPEC members came to the agreement to increase the oil output. Although member-countries convince that the increased production won’t cause the oversupply, the situation may appear to be different if the demand declines. As a result, the market will pull prices down on the big supply.
3. Venezuela is sinking.
The hyperinflation in Venezuela pulls the country lower and lower. The oil production and exports have dropped by half since 2016. The further increase of the political and economic instability may lift risks of the further capital outflow. As a result, the country won’t have any chance to support the oil production. A further decline of the supply will support the oil market.
Forecast.
The oil market is affected by the various events, mostly by political ones. As a result, it is highly difficult to make predictions. The oil market is anticipated to stay highly volatile.
Let’s start with WTI.
On the weekly chart, WTI move in the horizontal direction.
The key levels are the support at $64 and the resistance at $75.25. Political events will pull prices from up to down and vice versa, but the continuation of the horizontal move is anticipated.
What about Brent? It has almost the same way as WTI. However, we can say that Brent is stronger than WTI. The horizontal move is anticipated here as well. The support is at $70.30. The resistance is at $80.50.
Making a conclusion, we can say that in the long term the oil market is under threat. The demand is anticipated to decline. The supply is questionable as there are uncertainties about the Venezuelan and Iranian supply but at the same time, OPEC-members are going to increase the oil production. How to forecast the direction of the oil market? The only way is to follow the news.
Note: OPEC/non-OPEC allies will meet on September 11 to discuss a new production strategy. Countries agreed to increase the oil production but didn’t come to an agreement on steps. The event will affect the oil market. Traders should be careful!
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Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.
Bearish scenario: Sell below 1.0820 / 1.0841... Bullish scenario: Buy above 1.0827...
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