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Brent forecast for 15 July 2020

July 15, 2020

July 15, 2020

Brent forecast: don’t play against the oil Fed!Dmitri Demidenko

Fundamental oil forecast for today

The black gold market has its own central bank

Learning from the mistakes of others is the best way. Central banks will sooner or later quit their soft monetary policies and cut their balances. Any positive experience would be useful as there’s a high risk of repeating the Fed’s experience: in 2013 it gave rise to a huge market hysteria after having announced a “tapering” of some of its QE policies. In this regard, July’s summit of OPEC+ may give some food for speculation. Not for nothing is the organization compared with the Fed: its decisions affect both oil and other financial markets.

The reason for normalization of monetary policy will be an economic recovery. The global demand for “black gold” is reviving, so OPEC+ may roll back production cuts to 7.7 million b/d in August-December from 9.7 million b/d in May-July. Such is the plan, but extra 2 million b/d is like the tapering of QE. Just like in 2013, the market may get hysterical and [Brent][1] and [WTI][2] quotes may collapse too. Saudi Arabia and Russia need to be careful and not go too far.

The market remains stable ahead of the summit. It may mean that OPEC+ will manage not to frighten the bulls. The cartel has adjusted a forecast for global demand to minus 8.9 million b/d in 2020 and revised the economic downfall estimate from 3.4% to 3.7%. It  means no sharp movements are foreseen at the summit. Most likely, the main focus will be put on the countries that didn’t observe output curtailments earlier. They will have to do so. I mean Iraq, Nigeria and Kazakhstan. As a result, the total volume of output cuts may reach 8.5 million b/d in August instead of 7.7 million b/d. OPEC+ will save time and oil will continue growing.

Theoretically, Russia and Saudi Arabia’s course of action was supposed to benefit US companies in May-July. True, the US output volumes stopped falling. At the same time, Parsley Energy, one of the biggest WTI producers, thinks that the peak of production was reached in February and would never be repeated.

US oil production dynamics

![LiteForex: Brent forecast for 15 July 2020][3]

Source: Bloomberg.

What is very important is that US oil reserves continue falling. It points to a growing domestic demand despite an increase in new COVID cases.  The US economy seems to be adapting to the pandemic. Chinese oil imports  grew to record 11.3 million b/d in May too. Altogether the global demand is recovering fast and that makes   [Brent][1] and [WTI][2] fans feel optimistic.

According to Rapidan Energy Group, the world will easily consume 2 million b/d. The company expects that global demand will grow 18% to 95.7 million b/d in Q3 and continue growing in Q4. For a complete correction of Brent, a W-shape recovery of US GDP caused by another lockdown will be required. This scenario is unlikely to develop though. So, [Brent][1] retracements to $40 and $38 per barrel or a break of resistance at $43.9-44 should be used for building up [June’s longs][4] with targets at $47 and $51.

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Price chart of UKBrent in real time mode

![Brent forecast: don’t play against the oil Fed!][7]

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.

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  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/usa-crude-production-15-07-20.jpg?w=30&s=e5e6f44d0afbcd18184c99e3a868dab7
  4. www.liteforex.com/blog/analysts-opinions/brent-has-a-joker-in-the-hand/
  5. my.liteforex.com/?category=analysts-opinions&slug=brent-forecast-dont-play-against-the-oil-fed&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
  6. my.liteforex.com/deposit/?category=analysts-opinions&slug=brent-forecast-dont-play-against-the-oil-fed&promo_code=BLOG&utm_source=blog&utm_medium=article&utm_campaign=bonus
  7. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/liteforex-blog-brent-15-07-20.jpg?q=75&w=1000&s=9d1851750e702186363b8a2e5cf80686