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Brent Crude Oil Technical Analysis - Brent Crude Oil Trading: 2017-07-18
Active rig count growth has slowed down in the US
The pace of growth of active rig count in the US has slowed down to a minimum since November of the last year. Will Brent prices continue rising?
Over the last week, the active rig count in the US has increased by 2 units and reached 765 units. Over the past 4 weeks, it increased by 5 drilling rigs, which is the slowest increase since November 2016. The US Bureau of Labor Statistics reported that drilling costs in the US increased by 8% in June 2017 compared to November 2016. This could have caused a deceleration of activity in the American oil industry. At the same time, last week, the maximum reduction in oil reserves was recorded in the US over the past 10 months, which may indicate an increase in domestic demand. An additional support for quotations is provided by an increase in oil consumption in China. Its processing amounted to 46.08 million tons or 11.21 million barrels per day in June. This is 2.3% more than in June of the last year, and slightly less than the historic high recorded in December 2016. In the first half of the current year, oil refining in China increased by 3% and reached 11.1 million barrels per day. The US Energy Administration forecasts that the average cost of Brent in 2017 will be $51 per barrel. This approximately corresponds to its current average price since the beginning of the year.
On the daily timeframe, Brent: D1 is in a wide range of 57.5 – 44.5. A few weeks ago, it bounced off from its lower boundary and is moving to the upper boundary. The further price increase is possible in case of the reduction in oil production in the US and other countries, as well as in case of maintaining a high world demand.
- The Parabolic indicator gives a bullish signal.
- The Bollinger bands have narrowed, which indicates low volatility.
- The RSI indicator is above 50. No new divergence.
- The MACD indicator gives a bullish signal.
The bullish momentum may develop in case Brent exceeds the last fractal high at 50. This level may serve as an entry point. The initial stop-loss may be placed below the last fractal low, the Parabolic signal and the lower Bollinger band at 46. After opening the pending order, we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level at 46 without reaching the order at 50 we recommend cancelling the position: the market sustains internal changes that were not taken into account.
Summary of technical analysis
| Position | Buy |
| Buy stop | Above 50 |
| Stop loss | Below 46 |
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