FXStreet (Guatemala) – Analysts at Brown Brothers Harriman noted that commodities are back under pressure, sending ripples through various assets classes, both the charts and fundamentals suggest to them that there is further downside ahead for oil.
Key Quotes:
“On the fundamental side, the deadline to reach a deal with Iran was extended again, but an agreement seems close at hand. Talks in Vienna have been ongoing for 10 days, and comments suggest a lot of progress has been made. The National Iranian Oil Company hopes to bring exports back to pre-sanctions levels within three months after the embargo ends. This would mean exports of around 2.5 mln barrels per day, up from around 1.4 mln barrels per day on average in 2014 (according to the EIA). For comparison, Russia (the world’s second largest exporter) averaged about 4.8 mln barrels per day in 2014.
Pressure is also coming from steadily increasing supply and price cuts from OPEC. US output is also making cycle highs near 10 mln barrels per day, and last week marked the first increase in US drilling activity in 8 months. On the demand side, downside global growth risk from China and EU are likely to keep a lid on energy demand.
Technically, Brent is leading this move and has already broken the 62% retracement objective from its March-May bounce, which sets up a test of the March low near $52.50. Further losses would set up a test of the January cycle low near $45.20.
WTI is getting dragged lower, and is about to test the 62% retracement objective from its March-May bounce near $49.88. A break below that level would set up a test of the March low near $42.00.”
(Market News Provided by FXstreet)