General analysis Brent for 11.05.2022

Current Dynamics

The U.S. Department of Energy lowered its oil price forecast for 2022 and raised it for 2023. The U.S. announced the first deals to replenish strategic reserves. OPEC does not intend to increase oil production to curb oil prices.

The U.S. Department of Energy's Energy Information Administration (EIA) has adjusted its forecast for Brent crude oil, so in 2022 the oil price forecast fell to $103.35 from $103.37, and in 2023 the price forecast rose to $97.24 from $92.57 per barrel of oil. The forecast for WTI crude oil for 2022 rose to $98.2 from $97.96 and for 2023 to $93.24 from $88.57.

Meanwhile, the U.S. Senate Judiciary Committee approved a bill that would allow the U.S. government to file antitrust suits against OPEC members. The bill suggests making illegal any joint actions of the countries that aim at limiting oil production and fixing oil prices.

The volume of daily supply of oil from the US strategic reserves became known. In April, the average supply of oil amounted to 525 thousand barrels per day, which is almost twice less than the declared volumes. Also, there were announced the first deals to restore the strategic oil reserves (SPR). It became known that 60 million barrels for this purpose are going to be contracted in autumn and loaded into the SPR at the beginning of 2023.

Against the background of such plans, Brazil refused the U.S. request to increase oil production. Representatives of Petrobras explained that regulating oil production levels is a matter of business strategy, not diplomacy. Also the OPEC countries have no intention to increase oil production in order to keep down oil prices. UAE oil minister claimed that the lack of production capacities is a direct consequence of the stoppage of investments in the oil production over the past years.

It is also worth noting that a number of experts suggest a decrease in oil production in Russia by 10% on 1.1 million bpd from 11 to 9.9 million bpd. It is forecasted that this level of production will remain until Q4 2022, when it is forecasted that production will increase by 5%.

Let's compare the numbers. Release of oil from the reserves of the International Energy Agency (IEA) assumed the entrainment of the supply of oil in the next 6 months about 1 million barrels per day, if the experts forecasts are correct, Russia will decrease oil production by 1.1 million barrels per day for the next 6 months. It is worth noting that the accumulated backlog of OPEC member countries in February amounted to 1.1 million barrels per day.

The current correction dynamics of oil prices can be explained due to the tender held in Japan for sale of 4.8 million barrels of oil from national reserves within the framework of oil releasing coordinated by IEA.

According to the American Petroleum Institute (API) weekly crude inventories increased by 1.618m while experts predicted the decrease of 0.457m.

Today at 16:30 (GMT+2) the Energy Information Agency (EIA) will release data on crude oil inventories. It is expected a decrease of 0.457M in inventories.

Support and resistance levels.

Brent prices have pushed back from the key Fibonacci level of 23.6. The current trend is upward. The RSI oscillator touched the 30 level and began its upward movement. The oscillator is in the lower half.

• Support levels: 101.20, 98.75, 95.40
• Resistance levels: 120.05, 114.25, 110.65, 107.65, 104.80,

Trading scenarios

• Long positions can be opened from the current level with target 107.65 and stop-loss at 101.20. Implementation period: 2-4 days.
• Short positions can be opened below the level of 98.75 with a target of 95.40 and stop-loss 101.20. Implementation period: 2-4 days.