Brent attempts unsuccessfully to stay in the positive territory on Wednesday following a yesterday’s sell-off on the back of global risk aversion and US dollar demand fuelled by rather optimistic comments from the new FED Governor Powell. As a result, prices had to give up the $67 mark and retreat to lows barely above the $66 level which is now the immediate support.
The additional bearish driver for the oil market was this morning’s report that reflected the decreasing factory activity in China, the world’s largest oil importer. Besides, it is reported that Iraq has agreed a deal with Kurds to resume crude oil exports through its pipeline to Turkey. So far, the market hasn’t reacted to the news, as many traders doubt the deal will be implemented immediately, while in the longer term it may become a bearish signal for prices which tend to retreat on decreasing geopolitical tensions.
The market continues to closely monitor the USD dynamics while looking forward to the upcoming official weekly data from the U.S. Energy Information Administration EIA. Should the report show further increase in production, Brent could pull back to the recent lows and even test the $66 mark in case the crude oil and gasoline inventories rise as well.
By Helen Rush
Senior Analyst at Capital Markets