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Main » 2016 » February » 5 » The forecast of the Black Gold: oil as a mantra
The forecast of the Black Gold: oil as a mantra

On February it was announced possible talks OPEC and Russia to reduce oil production quotas. I think they will end in vain, if any, take place.



The Saudis, as a major player in OPEC do not show the desire to reduce production. It is believed that they are fighting for a place under the sun with the US shale oil. Losses parties are already evident, and the goal has not yet been achieved. In addition, the Kingdom of the budget is formed, based on $ 29 / bbl and is executed with a surplus.


 Russia  also is not profitable to reduce production. 

Firstly, the technological conditions of production in Russia is much more complicated, and the logistics arm of delivery to the shipping ports are significantly higher than those of competitors. Accordingly, the potential loss of revenue from reduced production, add more than the competition, increased costs associated with underutilized or partial preservation of overcapacity on the production and transportation. In addition, there is no certainty that a possible rise in prices will block the associated costs and falling revenues as the state and companies.

Second, the decline in production - is a potential reduction in market share, which in conditions of excess supply is becoming a major factor of competition.

And most importantly, engaging in a price alliance with the Saudis, we indirectly support its geopolitical rivals in Syria. And Syria - is the key to the Middle East and the intersection point of the strategic interests of practically all significant world players from the Gulf monarchies, Turkey and Iran to Europe, USA, Russia and China. To a certain extent here laid the foundations of the world order, which will determine our future for decades.

Should an artificially produced, quantitatively and temporarily unspecified price increase above described risks?I think no. Therefore, if the agreement and will take place, it is more in words than in deeds. Sacrifice for the sake of compromise its strategic interests at the moment the parties are not ready, even though verbal intervention to support the market may continue.

Being in the "bottom" layer, the oil market is doomed to overreact to information stuffing. Messages that oil producers are "ready to negotiate" (ie, "prices are too low") was perceived by market participants as an additional reason for the closure of "short" positions, which caused the local correction. The game was delayed for a fall. The market needed a pause to reflect on the prospects and risks.

It is important to remember that oil is still within the boundaries of the falling price channel ((1-1), the movement of April 2015 to March.) And does not reach the strong support levels between 2000 and 1990., So talk about reaching the bottom and a trend change is clearly premature.


Unexpected Gary Cote * by the Bank of Japan announced that it downgraded to negative interest (hoping to stimulate their own economies against the backdrop of its current slowdown), "dropped" the dollar and became a kind of compensator tighter Fed policy. This measure should contribute to the retention time of global interest rates to the minimum, which is positive for the markets.

The loss ratio for banks to hold excess cash balances with the Bank of Japan should contribute to strengthening the demand for market-based instruments. In addition, the actions of the Bank of Japan are undermining the chances of the Fed to conduct announced in December 2015 four raising the discount rate in the current year.

This should support share prices, bonds and commodities.

Oil has already reacted. Quotes are close to the upper corrective rebound. Potential upward movement is still possible to the level of $ 38-39 / bbl. The forecast traffic patterns presented in Figure 2


Oil reduced the growth rate, left channel (2-2) and moved to a new, flatter, rising channel (3-3) to enter the highs for February 10-12. On further movement of the character affect the fact and the results of consultations OPEC-Russia military-political situation around Syria, associated with a possible intervention in the north of the country Turkish troops, the forecasts for the March meeting of the ECB and the other, above all, political, information occasions. Most likely the outset within the boundaries of $ 38-36 / bbl, up to the resistance line falling trend channel (1-1). All of this will be seen in late February - early March. Still believe that oil will go down from the falling channel resistance line (1-1) to retest the lows ($ / bbl 27), and we will see the best performance of the figures double bottom or, more likely, in my opinion, oil will continue to decline to a more fundamental lines of support ($ 22.5 / bbl from 2000. and $ 16 / bbl by 1990.). The ruble will repeat the movement of oil prices, but with a lower amplitude (50-70% of the oil). This is due to the overall relative reduction in the share of oil and gas revenues in the budget due to a fall in prices, and with a surplus of the current account balance of payments of the Russian Federation. * Gary Cote - term judo - sweeps the inside.

Analysis Alpari


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