Brent quotes analysis as of May 5, 2018
In my mind there is still a lot of room for growth. However, it won't happen in the nearest future because there are too many traders who want to lock in profits. This is another proof to the old rule – there is no good rise without a fall. Let's briefly cover the situation with the reserves and production.
OPEC is slightly decreasing oil production mainly due to Venezuela. Libya despite all the problems has managed to approach the level of 1 mln bpd, which I think is its maximum considering the unstable political situation. The other members of the cartel, Iran and Iraq included, have kept their production at about the same level.
Production started to decline in Russia. In the first four months of the year oil and condensate production amounted to 179.4 mln tons, which is 1% lower than last year. Export has declined by 4.5%, which is wonderful. If our government doesn't want to limit the sales of our mineral reserves, let the nature do it instead.
Meanwhile production in the US has grown by 8.9% or up to 10.619 mln bpd within the same period. Commercial oil stocks grew by 6.2 mln barrels last week and reached 436 mln barrels, which is 91 mln barrels less than last year. Drilling rate continues to increase – the active oil rig count in the US has grown to 834, with 12.4% increase since the beginning of the year.
There is nothing surprising about it. The only question is how long the shale formations will sustain such super-intense development.
The monthly charts (pic.2) indicate that the prices are moving close to the top of the trend channel. Now the trend is supported by the thread of additional sanctions against Iran. However, this source won't be used for too long, the need for correction is evident and it will take place. Considering the width of the trend channel the Brent price may bounce back as far as to $60-65, though very strong negative news is needed to make this happen.
The price is more likely to decrease to $70, to the 2015 maximum. Providing there is no extreme news, I expect the correction to complete in August-October and the price to continue rising to the level of $80.