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The OPEC and other Decisions Made Oil Decrease

By:
Dmitriy Gurkovskiy
Published: Jun 25, 2018, 13:57 UTC

The Brent oil prices are “sliding down” after last Friday’s rally. Now, when investors have results of the June OPEC+ meeting, they will try to find a new support.

OPEC Countries Flags

So, after receiving recommendations from the technical committee and having the summing-up meeting, the OPEC+ has decided to increase the daily output by approximately 1 million barrels. The organization says that the real increase will be about 600-800 barrels per day. In the comments that followed the decision, the OPEC+ noticed that earlier the market supply was increasing ahead of schedule mostly due to some particular countries, such as Venezuela, and now it’s necessary to revise the output parameters in order to balance supply and demand.

The output will increase very soon, starting the third quarter this year, if to be more specific. However, oil prices are reducing at this very moment, because a lot of investors act under “sell-on-facts” principle. Later, after emotions on the market die down, the Brent price will reach stability inside a new trading range, which will support a new long-term channel.

In this case, the lobby of two countries, Russia and Saudi Arabia, was very efficient. Probably, these very two counties will provide the biggest volume of the output increase. Among other countries to increase the output will be the United Arab Emirates, Kuwait, and Algeria.

One should note that not all countries within the organization will contribute because some they just don’t have enough production facilities for that.

The oil market will remain influenced by the OPEC+ decision for several more days, but after that, the tension will slowly reduce. Investors are tired of commodity prices volatility over the last several weeks, so the time has come to make a pause

Looking at the H4 chart, one should notice that the current tendency is steadily heading downwards. Analyzing how wide the current tendency’s channel is, the amount of time this trend continues, and how often the price “touches” support and resistance lines, one may assume that the instrument may break the resistance level near 75.60 and trade inside the upside projected channel towards 80.00. However, if the price tests the resistance line and rebounds from it, Brent may start a new descending impulse to reach the support level at 69.70. If later this level is broken as well, the instrument may trade towards the downside projected channel. The main target after breaking the current support level may be at 63.50.

Brent Oil 4H Chart
Brent Oil 4H Chart

This article was written by Dmitriy Gurkovskiy, a Chief Analyst at RoboForex

About the Author

Dmitriy has Masters Degree in Finance from London School of Economics and Political Science, and a Masters Degree in Social Psychology from National Technical University of Ukraine. After receiving postgraduate degree he began working as the Head of Laboratory of Technical and Fundamental Analysis of Financial Markets at the International Institute of Applied Systems Analysis. The experience and skills he gained helped him to realize his potential as an analyst-trader and a portfolio manager in an investment company.

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