The struggle for the market share in the oil market continues

The last year in the oil market was rather one-sided in terms of impact on the dynamics of oil prices: the OPEC + deal, since the fall of 2017, has finally shown its effectiveness, resulting in the elimination of surpluses in the oil market (world oil reserves are close to the 5-year average); the escalation in the Middle East keeps investors in constant tension and does not give reasons for fixing profits on long positions in oil; Venezuela is plunging deeper into the abyss of economic chaos and hopelessness, reducing already significantly sagging oil production, etc. As a result, we have what we have - oil growth from $ 25 to the current $ 73 (WTI). That is, oil rose 3 times (!).

Such an increase in oil prices, obviously, has more speculative than an objective economic basis. There is no deficit in the market and this can’t provoke purchases at any price; the demand for oil has not increased threefold, and the supply has not decreased by comparable figures. That is, we have a classic speculative price bubble. The result of price bubbles is always the same - collapse. The only question is, when will this happen.

Now, standing on the local top, it can be seen that it is becoming harder and harder for an asset to grow. Therefore, it's time to think about what will become the straw that breaks the back of the oil camel, which is stubbornly pulling quotes up. The most obvious answer is the termination of OPEC+ deal. In the end, it was this arrangement that could radically change the market situation. But even this requires a serious reason, because current prices are extremely beneficial for the main parties of the agreement - Russia and Saudi Arabia (each has its own reasons).

We have a version about this. Literally last weekend, the US and China decided to suspend the trade war. Further, we quote one of the key terms of the deal: "China agreed to significantly increase the volume of purchases of energy products exported from the US." What does this mean? This means that the US shale has won a stake in the world's largest segment of the oil market. And then we need to remind the reasons for the drop-in oil in 2014 from $ 110 to $ 25 (WTI case): Saudi Arabia said that it will fight for market share and if they will have to literally pour oil in the market, they will do so. The result of this we recall once again - the fall in the price of oil more than 4 (!) times.

As we can see, the events of this week may launch a new round of war for a market share in the oil market. The struggle is even tougher and more uncompromising than last time, as the American shale have significantly improved their competitiveness in the last few years.

And this means that in the foreseeable future we will face a serious correction in the oil market and the formation of a new downward trend.
Our recommendations in this regard are the opening of long-term oil sales. The terms of the position can be calculated in many months, but the return from the trade will be hundreds of percent.