Forex Analysis & Reviews: 09.05.2023 - Oil comes out of the shadows

Live Chat

InstaForex Loprais Team - Official participant of the Dakar rally

This section features the most important information about trading with InstaForex. We provide both analysis from leading experts for experienced traders and articles on trading conditions for beginners. Our services will help increase your profit potential.

Become Trader

Account Opening

See also

Trading Conditions

Forex Analytics

Charts

This section is designed for those who are just starting their trading journey. InstaForex educational and analytical materials will meet your training needs. Our experts' recommendations will make your first steps to trading success simple and clear.

Start as Beginner

How to start trading

Useful information

Training and recordings

InstaForex innovative services are an essential element of productive investment. We strive to provide our clients with advanced technical capabilities and make their trading routine comfortable as we are recognized as the best broker in this regard.

Become Investor

PAMM System

ForexCopy System

Passive investments

OYS account

Partnership with InstaForex is beneficial and top-tier. Join our affiliate programs and enjoy bonuses, partner rewards, and the possibility to travel with the team of the world-renowned brand.

Become Partner

Main Page

Partner Area

Advantages for Affiliates

Registration

This section contains the most lucrative offers from InstaForex. Receive bonuses when topping up an account, compete with other traders, and get real prizes even when trading in a demo account.

All Promo Campaigns

Bonuses

Contests

Events

Holidays with InstaForex are not only pleasant but also useful. We offer a one-stop portal, numerous forums, and corporate blogs, where traders can exchange experiences and become successfully integrated into the Forex community.

Full details

Forums

We are in social networks

Forex humour

Forex Portal

InstaForex is an international brand created in 2007. The company provides services for online FX trading and is recognized as one of the world's leading brokers. We have won the trust of more than 7,000,000 retail traders, who have already appreciated our reliability and focus on innovations.

Learn More

History

Why Choose Us

InstaSport

Regulation

Company News

Awards

InstaForex Stars

InstaForex Offline

Headquarters

Key documents

Social Responsibility

InstaForex Loprais Team - Official participant of the Dakar rally

09.05.2023 11:10 AM

Oil comes out of the shadows

Sometimes the answer to the question of why the price has risen is extremely simple: it was low. The three-day Brent rally following a three-week decline in North Sea oil prices is an example of this principle being realized. The oil market looked oversold. Neither macroeconomics nor fundamental indicators confirmed its serious collapse. Moreover, Vortexa data shows that the amount of oil stored on stationary tankers has fallen to its lowest levels since mid-February.

The main drivers for Brent's peak in recent weeks were investors' belief in a recession in the U.S. economy and distrust in Russia. The latter announced a 5% reduction in oil production. However, export data suggests that this could be false. In the end, misleading information could drive a wedge between Moscow and Riyadh, affecting OPEC+ efforts to stabilize the market.

Expectations of a downturn provoked by the most aggressive tightening of monetary policy by the Federal Reserve in decades have pulled Brent quotes into the abyss. Since 1974, the Federal Reserve,on average, began lowering rates five months after they peaked. Under current conditions, monetary expansion would be tantamount to a downturn and reduced demand for oil. Especially considering that in March, the U.S. became a net oil exporter for the second time in history since 1994.

Dynamics of the U.S. oil trade balance

Oil shipments abroad increased by 24% to a record $27.6 billion, the fastest growth rate since 2017. At the same time, imports rose to $27.1 billion, the worst figure since November.

The demand for gasoline in the U.S., which usually grows in anticipation of summer, did not inspire optimism for oil fans either. Unfortunately, its dynamics lag behind the indicators of previous years. This fact is also considered negative for oil.

However, strong employment statistics in the U.S. have relieved the burden of responsibility on Brent bulls' shoulders. If the U.S. labor market is strong as a bull, what recession could we be talking about? Most likely, investors are confusing the desired reduction in the federal funds rate by the end of the year with reality. If there is no recession, China continues to recover from COVID-19, and the eurozone economy remains resilient, rumors of a slowdown in global demand for oil will be greatly exaggerated.

As for supply, forest fires in Canada have displaced about 300,000 people and forced companies to shut down oil production by 200,000 bpd. Moreover, voluntary production cuts by some OPEC+ countries will begin in May, affecting the oil market balance.

Technically, on the daily chart, Brent's formation of reversal patterns such as Wolfe Wave and Double Bottom indicates that the worst for the North Sea grade is already behind. The successful test of resistances at $77.6 and $79.1 per barrel will be a reason for its purchases.

You have already liked this post today

*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.