Brent oil quotes, being under the pressure of weak macroeconomic statistics, fell to the local lows of early May, in the range of 71.5-72. As a month ago, buyers became more active at these levels, and as a result yesterday it was a strong growth impulse by 3%. Usually by the end of the week trading activity goes down, but today there can be seen an even greater increase in the volatility of oil prices.
Market participants are waiting for OPEC+ meeting scheduled for Sunday. There is still no clarity on the decision regarding quotas for oil production by the exporting countries. While representatives of Saudi Arabia frightened holders of short positions with potential problems, other OPEC+ members demonstrated moderate views on the state of the oil market. The scenario in which Saudi Arabia, on its own initiative, would further reduce oil production and the other oil-exporting countries would maintain the status quo is quite realistic. Precedents for such a measure already exist.
A wave of pessimism hit the market of commodities after the publication of China's PMI data on Wednesday. Currently, the negativity is declining. Yesterday the Caixin agency presented its figures on industrial business activity. First of all, it analyzes private business, not large government enterprises. This statistic was much better than the official data: the PMI rose from 49.5 to 50.9, exceeding expectations of 50.3.
Statistics on the weekly change in oil reserves by the U.S. Energy Information Administration had a mixed character. Commercial reserves of oil rose contrary to forecasts. However, more than half of the total increase of 4.5 million barrels was caused by another reduction in strategic reserves. In addition, U.S. oil production continues to be stagnant, which could increase the risk of a deficit in the second half of the year.
The support of 72 confirmed its strength again and prevented a further decline in the price of Brent crude oil. To get back to last week's local highs, there is a need to overcome the intermediate-term growth target of 76.
The following trading strategy option can be suggested:
Buy Brent oil in the range of 74.5-75. Take profit – 76. Stop loss – 74.