Brent oil prices recovered from most of the mid-month losses by the end of August. Yesterday, the price came close to the mark of 87 dollars per barrel. Today, the price is trying to gain a foothold above this level. The nearest growth target for the oil quotes is the summer maximum, set on August 10, just above the mark 88. A combination of fundamental factors suggests a high probability of such a development.
The U.S. oil reserves continue shrinking. They declined by 10.6 million barrels over the previous week and by more than 34 million barrels since mid-July. The U.S. crude stockpiles are now only 1 million barrels above the 10-year seasonal average, while a month ago the surplus reached 22 million barrels.
Statistics on Purchasing Managers' Index of China could spoil the bullish mood of oil market participants. The indicator remains in the contraction zone, although the manufacturing PMI showed a slight improvement — from 49.3 to 49.7 points. The most important thing is that oil imports could have rebounded from July's heavy decline. According to preliminary data from Refinitiv, China bought 11.72 million bpd of oil last month. This is 13.5% more than in July.
The main intrigue of the next week is the decision of Saudi Arabia and Russia about the volumes of oil production and supplies for October. According to analysts' expectations, Saudi Arabia will extend its voluntary cut in oil production by 1 million barrels per day for another month. As Deputy Prime Minister Alexander Novak said, Russia has already agreed its level of oil production and exports for October with other OPEC+ countries. Maintaining the restrictions will support oil quotations.
The RSI indicator has recently turned upward and is still far from the overbought zone. So, from a technical point of view, there are no big obstacles for the continuation of Brent price growth. The short-term target is the level of 88.
The following trading strategy might be suggested:
Buy Brent oil near the level of 87. Take profit 1 – 87.5. Take profit 2 – 88. Stop loss – 86.
This content is for informational purposes only and is not intended to be investing advice.
