FxWirePro Call Review: Brent target extended to $55 per barrel

Our calculations at FxWirePro suggests that further downside remains open for Brent crude price, as near term supply outweighs demand growth.

• While the International Energy Agency (IEA) reduced its oil demand growth forecast to 1.2 million barrels per day, the production has been rising in the United States, and Russia - world’s two biggest oil producers. Earlier this month, U.S. oil production reached a record high of 12.3 million barrels per day, while Russia produced 11.13 million barrels per day in May, up 0.65 million barrels per day from a year ago.
• The inventory has also been rising in the United States, over the past couple of months. Since September, the U.S. inventory level has reversed its steady decline and the level is higher by more than 80 million barrels.
• Despite the tensions between the United States and Iran, insiders suggest that two countries might actually go for negotiations to resolve the dispute, which would be bearish for the oil price.
• More than 3 million barrels worth of OPEC spare capacity is also weighing on Brent.

Trade idea:

• Previously, we suggested the following downside targets for Brent $68.2, $63, $61.2, $59, and $58.2 per barrel. In this review, we would like to further extend the final target to $55 per barrel.

• Brent is currently trading at $61.7 per barrel.