Logo

Posts

UKBrent forecast for 25.06.2020

June 25, 2020

June 25, 2020

Brent has a Joker in the handDmitri Demidenko

COVID-19 vaccine will ensure oil rally

As you know, the market is ruled by Fear and Greed. The greed triggered the epic rallies of the S&P 500 and oil up form March lows. The fear, which came back after the epidemiological situation had become worse in the USA, sent the US stocks and the oil price down in the correction. The stock buyers are not confident in a soon rebound of the US growth, the [Brent][1] and the [WTI][2] bulls have doubts that the global demand will be back to the trend in 2021-2022. Another lockdown is hardly possible, but investors are far less optimistic.

Before trade wars and pandemic, the oil market was full of supply. Investors were tracking the OPEC’s attempts to improve the supply/demand balance by cutting oil production. Occasional geopolitical shocks, such as Iran’s potential blockading of the Strait of Hormuz or attacks on industrial sites in Saudi Arabia, resulted in short-term price hikes. The demand was not that important in pricing. However, the oil market structure has changed because of the US-China trade war and COVID-19 pandemic. According to OPEC, global oil demand in the second quarter will fall by 17.3 million barrels a day, and it will be down by 9.1 million b/d year-on-year in 2020. That is why Brent fell in March to its lowest level since 1999.

In the April-June period, the situation seemed to be improving amid several positive factors. China’s economy was recovering, investors believe in the V-shaped rebound if the US growth, the price war between Russia and Saudi Arabia ended, the OPEC+ agreed to cut the oil output by 9.7 million barrels a day, and the North American oil produces reduced the output by 3.8 million barrels a day. Nonetheless, the COVID-19 epidemic hasn’t been defeated, and the global oil demand isn’t recovering. So, the oil market is again in contango. Long-term oil futures are bid higher than nearby contracts, signaling the surplus will be long-term. Besides, contrary to the expectations, the US crude inventories didn’t reduce the economy’s reopening, they have almost reached 540 barrels.

Oil market sentiment

![LiteForex: UKBrent forecast for 25.06.2020][3]

Source: Bloomberg

Dynamics of WTI and U.S. crude oil inventories

![LiteForex: UKBrent forecast for 25.06.2020][4]

Source: Bloomberg

Therefore, the global demand, especially in the US, doesn’t any longer support the [Brent][1] and the [WTI][2] uptrends, which makes correction more likely to start soon. However, other benefits of the oil bulls are still operating. Unlike in the USA, the epidemiological situation in China and Europe is improving. The OPEC+ countries have cut the oil production by 9.7 mb/d. The US shale production will hardly return to the pre-crisis levels soon. Therefore, the oil bulls might resume the rally. According to Bloomberg experts, in 18 months, the US production will be 16% lower than its record highs of 13 million barrels per day in February.

Dynamics of U.S. oil production

![LiteForex: UKBrent forecast for 25.06.2020][5]

Source: Bloomberg

In my opinion, positive outweighs. COVID-19 vaccines and medicines should be soon developed, the death rate is declining despite the growth in the number of new coronavirus cases. So, the global oil demand should increase after a while, and we could use the current oil market correction to enter buy trades. I suggest opening [Brent][1] middle-term longs with the targets at $47 and $51. LiteForex [trading services][6] perfectly suit this goal.

P.S. Did you like my article? Share it in social networks: it will be the best “thank you” :)

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

Useful links:

  • I recommend trying to trade with a reliable broker [here][7]. The system allows you to trade by yourself or copy successful traders from all across the globe.
  • Use my promo-code BLOG for getting deposit bonus 50% on LiteForex platform. Just enter this code in the appropriate field while [depositing][8] your trading account.
  • Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders

Price chart of UKBrent in real time mode

![Brent has a Joker in the hand][9]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Rate this article:

{{value}}

( {{count}} {{title}} )

  1. my.liteforex.com/trading/chart?symbol=UKBrent&returnUrl=true
  2. my.liteforex.com/trading/chart?symbol=USCrude&returnUrl=true
  3. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/kontango-oil-25-06-20.jpg?w=30&s=1c77b95071010fe21523544626b2f9dc
  4. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/wti-inventories-25-06-20.jpg?w=30&s=31ada169bee0237165b1c985be017249
  5. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/usa-oil-production-25-06-20.jpg?w=30&s=37dbec7bf3e286ff66f5e262049d5ef4
  6. my.liteforex.com/?go-zone=ZASdmqixF1Cnq2et7jKB-Fl4wu_-MKOB
  7. my.liteforex.com/?category=analysts-opinions&slug=brent-has-a-joker-in-the-hand&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
  8. my.liteforex.com/deposit/?category=analysts-opinions&slug=brent-has-a-joker-in-the-hand&promo_code=BLOG&utm_source=blog&utm_medium=article&utm_campaign=bonus
  9. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/liteforex-blog-brent-25-06-20.jpg?q=75&w=1000&s=1698c374bf557ae6ab08356531b0c13d