BAKU, Azerbaijan, Oct.2
By Leman Zeynalova – Trend:
The outcome of the US election could set the tone for oil prices over the mid-term, Trend reports citing Fitch Solutions.
“We currently forecast Joe Biden to win the presidency at a 70 percent probability. If Biden were to win, we expect the US to reverse several Trump-era policies which could see lower future fuel demand and see a return of Iran to the global oil trade. Far from being bearish for oil prices, a Bidenwin could see some measure reduce US oil production and improve the US economic recovery which would both provide upside pressure to oil prices although at the expense of the US oil and gas industry.
“In order to counter the potential soft demand, we expect OPEC to respond by lowering supply in response to any notable fall in global oil consumption to support prices. OPEC will ultimately be the deciding factor on the supply outlook and provide downside protection for prices should market conditions deteriorate although increasing production cuts would far from certain with many members including Russia likely to resist.
“Range-bound Brent appears to coming to a head with technical analysis indicating the potential for volatility in the near term, with various resistance levels measures showing a wide and highly variable spread. The shorter-term moving average has broken through the longer-duration average, which indicates that support for prices is waning. We see key support near the upper USD30/bbl range and a resistance level near USD45/bbl. Given the wide range of factors impacting supply and demand fundamentals, the case for further upside to prices looks weak.
“The ratio of longs to shorts in managed money has pared back slightly in the last week (ending September 22) afterspiking during the bulk of September. The ratio indicates the number of long positions in Brent out-number shortpositions by 5 to 3 which is approaching the imbalances seen during the worst of the price down-turn in March and April this year. The historically elevated short positions indicate that managed money sees little price upside and holds a strongly bearish view on prices,” reads the report released by Fitch Solutions.
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Follow the author on Twitter: @Lyaman_Zeyn
