Oil prices rose moderately on Thursday, responding to joint statements by the UK and the EU about reaching an agreement on Brexit. In turn, pressure on quotes was exerted by the previously published API report, as well as recent data on oil reserves from the US Department of Energy. For the reporting week as of October 11, Crude Oil Inventories in the US grew by 9.281 million barrels after an increase of 2.927 million barrels over the past period.
In turn, Gasoline Inventories decreased by 2.6 million barrels, which exceeded forecasts of –1.2 million barrels. The volume of oil production in the United States did not change and amounted to the previous 12.600 million barrels per day. Today, investors are waiting for Baker Hughes US Oil Rig Count report.
The key support level is 52.82. After its breakdown, the next target will become the level of 50.37.
The price is under pressure of negative statistics from the USA. Last week, energy stocks increased significantly by +10.5 million barrels, although analysts expected +2.9 million. On the other hand, a recent statement by OPEC representatives about its readiness to reduce oil production keeps prices from falling. So, the organization’s secretary Mohammed Barkindo noted that at the next meeting in December, a plan for a stronger reduction could be considered but it depended on the course for the “black gold”.
Currently, the OPEC countries are reducing production by 1.2 million barrels per day, although some of them, for example, Nigeria and Iraq, do not fully comply with the agreements agreed earlier. According to economists, if the global economy starts to slow down significantly, it will negatively affect oil prices due to falling demand. It is unlikely that the alliance will be able to significantly rectify the situation using the mechanism of supply and demand in the market.
Today, US Baker Hughes Oil Rig Count data will be published.
Support and resistance
Stochastic is at the level of 78 and does not give signals for opening trading positions.
Resistance levels: 55.79, 56.80.
Support levels: 52.82, 50.37.
Short positions can be opened after the breakdown of the level of 52.82 with the target at 50.37 and stop loss of 53.48.
EUR rose against USD on Thursday, updating local highs of August 26. EUR was supported by Brexit deal consummation between the EU and Britain. The day before, the head of the European Commission, Jean-Claude Juncker, said that the parties managed to reach a compromise and form an agreement. Later, Prime Minister of Great Britain Boris Johnson announced the same. However, the detailed text of the agreement was not published. Its final version will probably be made public after the signing by all participants of the EU summit, which will end today. The development of “bullish” trend in the instrument was also facilitated by weak macroeconomic statistics from the USA on industrial production. Industrial Production in September fell by 0.4% MoM after rising by 0.8% MoM a month earlier. Analysts expected a decline of 0.1% MoM. Capacity Utilization for the same period fell from 77.9% to 77.5%, which also turned out to be worse than market expectations of 77.7%.
The British pound showed strong growth against the US dollar on Thursday, updating local highs of May 13. The new impetus for the growth of GBP was due to the achievement of a joint agreement between the UK and the EU on Brexit. The UK has a new chance to avoid a no-deal Brexit, while the compromise reached seems to be really beneficial to all participants in the process. However, there are still some obstacles. On Thursday, the DUP leaders said they did not support the new customs rules, which are provided by a new version of the agreement. In addition, the party insists on preliminary approval of the agreement by Stormont (the autonomous parliament of Northern Ireland), although there is not enough time for that. The ratification of the agreement in the British Parliament is scheduled for Saturday, October 19.
The Australian dollar rose against the US currency on Thursday, updating monthly local highs. The development of the uptrend in the instrument was facilitated by the fact that the UK and the EU managed to reach a compromise and form a new version of the agreement, which should now be signed by all EU member states and approved during the meeting of the British Parliament on October 19. Slight support for AUD on Thursday was also provided by contradictory data on the Australian labor market for September. Despite weak Employment growth, the report managed to support the markets by unexpected reduction in the Unemployment Rate from 5.3% to 5.2%. Today, the pair is trading in both directions, reacting to the weak data from China. In Q3 2019, China’s GDP slowed down from +1.6% QoQ and +6.2% YoY to +1.5% QoQ and +6.0% YoY.
The US dollar showed a slight decline against the Japanese yen on Thursday, retreating from local highs of early August, updated on the same day. The depreciation of USD was facilitated by the ambiguous macroeconomic statistics from the United States. Industrial Production in September decreased by 0.4% MoM after an increase of 0.8% MoM in August. Philadelphia Fed Manufacturing Index in October fell from 12.0 to 5.6 points, which was worse than market expectations of 8.0 points. Housing Starts fell by 9.4% MoM in September after rising by 15.1% MoM a month earlier. Analysts had expected decline by 8.6% MoM. Today, the pair maintains negative dynamics; however, weak data from Japan hinder the more confident growth of the yen. Japan’s National Consumer Price Index in September showed a slowdown from +0.3% to +0.2% YoY, while the forecast assumed an increase to +0.4% YoY.