At the end of last week, sentiment in the oil market eased somewhat. The sale of dollar and the desire to lock in profits before leaving for the weekend did the trick. A barrel of North sea Brent crude rebounded from a 3.5-month lows around $42,50. In March of this level limited the growth of quotations, acting as a strong resistance. Now the price groped support.
However, from a fundamental point of view the current bounce looks temporary, because it still does not justify the current situation on the market, which remains bearish. Players continue to bet on further price falls in the face of growing production and record stocks of gasoline in the United States. According to the CFTC, last week the net short position of oil WTI has reached the absolute record for 10 years – in the entire history of observations. This situation demonstrates the confidence of the market participants that in the near future to count on substantial improvement of imbalance of supply and demand is not necessary.
In favor of a negative scenario and say the next data from Baker Hughes. Last week the number of drilling rigs increased by 3 units to 374 units. Since the beginning of summer increased by almost 60 units. By the way, that the industry is not in the best of shape and says the situation in most oil service companies. In the second quarter, Baker Hughes reduced 3 thousand employees in the framework of the strategy for improving the economy amid rising losses.
Apparently, data on existing drilling rigs did not spoil the mood of the quotations, as reflected slowing growth, which could be perceived by the market as a prerequisite for the reversal and resumption of freezing of wells, especially oil in the last time considerably cheaper.
In General, the current recovery looks pretty fragile and is not supported by the fundamental picture in the market of “black gold”. At this stage the supports prices, a weaker dollar, which was disappointed by Friday’s data on US GDP in the second quarter the economy grew by only 1.2%, not much short of the optimistic forecast of +2.6%. If sales of the dollar will continue in the near future, Brent will stay afloat. However, the decline could resume at any time.