On Wednesday, oil prices rose significantly at the end of the trading session due to a decrease in crude stocks in the U.S.. The latest weekly report showed a 9.6 million bpd decline in the country's inventories. Analysts had forecast a decrease of only 1.8 million barrels.
However, the external background is still pessimistic for oil. Officials from leading central banks have confirmed the need for further monetary policy tightening in order to reduce inflation. The risk of interest rate hikes in the U.S. and Europe has led to a trend reversal in the oil market, notes Hiroyuki Kikukawa, president of NS Trading. In the second half of the year, demand for the energy carrier may decline and the price of oil might continue to drop.
The news about future oil shortages has been frequent lately. Companies refuse to develop oil fields because of rising costs and energy transition issues. However, Norway is actively investing in oil production, so its future supply on the market is expected to increase. This factor could also put pressure on prices.
On Wednesday, the Norwegian government granted permission to producers to develop 19 oil and gas fields. Investments in the industry will exceed 200 billion Norwegian kroner (about $18.5 billion). This decision is part of the country's long-term strategy to expand fossil fuel production.
The development of these fields will maintain a high and stable production level on the continental shelf, ensuring energy security of the country. This was stated by the Norwegian Minister of Oil and Energy Terje Aasland at a press conference.
According to the technical analysis, oil prices rebounded from the local low. However, the growth was quite limited amid large inventory declines. Prices have overcome only one Fibonacci level of the general flat range. This indicates a relative weakness in oil prices. The further trend will probably be downward again.
The level of $72.5 will be the downside target. It has served as support twice during the last trading days. A stop-loss could be placed upon the growth above the key Fibonacci level of 0.5, which corresponds to the price of $75.2.
A decline in the price of Brent crude oil:
Take profit – 72,5
Stop-loss – 75,2