Much has been said about the fundamental factors that are supporting the price of the barrel and shaking it in multiple directions for months. Right now, the raw material is in a delicate dance between an overloaded market, faced with the enormous injection from the US and lower than expected demand, and geopolitical fear in the Middle East. The recent fear of an attack by Israel against the Iranian oil infrastructure has inflamed the market’s spirits, although it seems to calm down in recent days. However, after recent days of sharp declines, crude oil faces a technical abyss. ANDInvestors’ pulse quickens as the barrel gets closer to a limit point that would open the door to an accelerated collapse: the 70 dollars.
This year it has only broken this barrier very briefly at the beginning of October, touching $69.2 due to weak data from China. This preceded a rebound from the Middle East ‘fire’. The only time in recent years that it traded below these levels was in the heat of the covid, in the years 2020 and 2021, when the pandemic stopped global activity and, therefore, the demand for crude oil fell to its minimum. However, crude oil has always found that insurmountable barrier at $70.
The barrel of Brent crude oil, a benchmark in Europe, is relying on a key support that experts see as the last barrier before experiencing an even greater fall. From the financial portal Marketwatch they explain in an analysis that during the last two years, the price of Brent crude oil has been largely limited to a price range that oscillates between 70 and 100 dollars. But in early August, Brent broke through its 200-week moving average by a wide margin. This break of a very long-term moving average has a bearish implication that defines the direction of the long-term trend of crude oil, which is downward, as explained by the North American portal.
Now, crude oil faces an even more complex scenario: “Close below the 200-week moving average and breaking the support of 68 dollars would trigger a strong sale and would project a decline again to 55-60 dollars,” the analysts of the American media point out.
Joan Cabrero, advisor to Ecotrader, elEconomista’s investment portal, points out that crude oil could face a significant fall if it breaks downwards from the lateral market in which it is currently located. A sideways market occurs when a price moves up and down within a price channel. Right now, Brent seems to be trading (like it’s caged) between 69 and 80 dollars. The breakout of this channel will determine the price trend of ‘black gold’ in the coming weeks and, probably, months.
Cabrero explains that if Brent ends up losing the $66 area, the base of another longer-term channel, oil could correct up to $55 per barrel.
For now, today the Brent makes a truce by rebounding 1.22% after experiencing one of the worst weeks of the entire year. The price of a barrel has collapsed by 7.57%, only surpassed by the 10.27% at the start of September. This poor performance has been led by the sharp turn in the Middle East. In recent days, Benjamin Netanyahu himself has publicly expressed his willingness not to attack Iran’s oil infrastructure. This was the great fear that had caused powerful advances since mid-October.
A market full of crude oil
From a fundamental point of view, the reality is that the market is now facing large production. In America, several countries stand out as large and growing oil producers, playing a key role in global supply. According to the latest reports from the International Energy Agency (IEA) and Bloomberg, the United States leads production in the region with a daily average of more than 13.2 million barrels per day (b/d), reaching an all-time high in 2023.
This increase has consolidated the country as the world’s largest oil producer, driven by the shale oil boom. This level of production has had a significant impact on global supply, helping to offset deficits in other producing countries. Canada, for its part, is producing more than 4 million barrels of crude oil daily.
Brazil is another giant of oil production in America, with a approximate production of 3.6 million barrels per day. Thanks to its important deep-water deposits, the country has maintained sustained growth in the last decade, which allows it to position itself as the second largest producer in the region. The development of pre-salt fields has been key for Brazil to remain competitive and approach its historical production maximums.
The United States, Brazil, Canada, Mexico and now Guyana are playing a crucial role.
Mexico, for its part, produces around 1.9 million barrels per day, according to the latest IEA data. Although it is far from its peak production in past decadesthe state-owned Pemex continues to be a relevant player in the market, especially in a context where proven reserves are being depleted and new developments in deep waters are slow to consolidate.
An interesting case is that of Guyana, which has quickly emerged as a significant producer, with production of more than 550,000 barrels per day in 2023, now already producing more than 600,000 barrels per day. Recent deepwater discoveries have made this small country one of the fastest growing hotspots in the region, attracting the attention of international investors and contributing to the global supply of crude oil.
At a regional level, these American countries play a crucial role in global oil supply, with the United States, Brazil, Canada, Mexico and now Guyana as major players. On the whole, Its production influences the stability of international prices and offers a counterweight to fluctuations in supply from other producing countries outside the region, especially those in OPEC+. It remains to be seen whether the market ends up giving in to the push of these new oil giants and manages to break the key barrier or if, as so many other times, the $70 shield manages to save the Brent from widespread declines.
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