Brent sell

Weak US data and production growth might cause a reversal of the oil price

06 July 2023 217
Weak US data and production growth might cause a reversal of the oil price

Oil prices actually rose after the announcement of additional production cuts by Russia and Saudi Arabia. Prices have once again hit the upper limit of the rectangle. Concerns about weak demand by the end of the year are still present. Nevertheless, OPEC representatives claim that demand will grow till the end of the year, and the current production cuts are necessary to balance the market. These statements look contradictory. The alliance is obviously not telling the whole story and is trying to reassure investors.

 

Iran's production growth may also cause a change in oil prices. The country has the resources to ramp up production.

The expansion of oil and gas fields is being discussed at the moment. Iran has the capacity to increase crude production and is making plans for it. This statement was made by Iranian Oil Minister Javad Ouji at an OPEC seminar in Vienna.

According to Javad Ouji, Iran plans to invest about $250 billion a year into development of production.

 

The latest economic data in the US signals a future slowdown in oil demand.

Last month, the ISM Manufacturing PMI fell to 46.0. Earlier it reached 46.9. The last time it dropped during the COVID-19 pandemic, indicating a serious downturn in the U.S. manufacturing sector. 

The index is now below the 50.0 threshold, which separates the growth of the manufacturing activity from its decline. According to experts' forecasts, its decline may continue over the next few months. 

Industrial energy consumption has a direct correlation with manufacturing and transportation. The cargo transportation and manufacturing sector account for more than 75% of all diesel fuel and other distillates consumed in the US.

 

According to the technical analysis, the price of oil has reached the upper limit of the rectangle. There is also a resistance level near the current level. There might also be a reversal from the current level. The growth target will be the 0.5 Fibonacci level of the entire wave of growth, which corresponds to $74.5. A stop-loss is placed at the upward resistance breakout to the level of $77.3.

 

Decline in the Brent oil:

Take profit — 74.5

Stop-loss — 77.3

This content is for informational purposes only and is not intended to be investing advice.

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