Optimism returns to the financial markets at the end of the summer. Jerome Powell is not expected to use "hawkish" rhetoric in Jackson Hole, which puts pressure on the US dollar. China managed to take control of the COVID-19 outbreak in a matter of days. Regulators in the United States have given full permission for the use of the Pfizer/BioNTech vaccine, which should help increase the demand for oil and petroleum products as the number of fully vaccinated Americans increases. And then there's the fire on the Mexican oil platform, which destroyed 400,000 barrels of black gold. As a result, Brent registered a 5% rally during the trading day, which was its best dynamics since November.
The delta strain of COVID-19 and the strong US dollar are the two main factors that have dropped the North Sea variety to the 3-month low area. There were even rumors on the market that with a further fall in futures prices, OPEC+ could make adjustments to the policy of gradually increasing production at the summit on September 1, as prices will become unprofitable for Saudi Arabia. However, most likely, radical measures will not be required. China quickly dealt with the pandemic, setting an example to other countries, and COVID-19, paradoxically, at first glance, undermined investors' faith in the dollar. The speech of Dallas Federal Reserve President Robert Kaplan was the reason for its sales. The senior official said he was ready to reconsider his views on curtailing QE if the coronavirus continues to spread across the United States.
Dynamics of oil and the US dollar
However, this position does not necessarily have to be followed by the other officials of the Federal Reserve. In particular, the probability that Jerome Powell will demonstrate cowardice and abandon the idea of normalizing monetary policy due to COVID-19, as the Reserve Bank of New Zealand did, is negligible.
China's rapid victory over the pandemic increases the chances of accelerating economic growth in the country as the fears of the local population to become infected with the coronavirus decrease. Good news for oil, if Beijing did not continue to adhere to the policy of selling black gold from strategic reserves. Interestingly, the US decided to follow its path. Washington intends to sell 20 million barrels at auction, which is twice as much as 3.5 months ago. The total size of the US strategic reserves is estimated at 621 million barrels. Americans have long been outraged that the growth of Brent and WTI quotes puts a spoke in the wheels of economic recovery, but administrative methods are not the best way to solve the problem.
According to Goldman Sachs, the impact of the delta strain on the oil market will be temporary. The upward trend will soon recover. USB Group predicts an increase in the quotes of the North Sea variety to $75 per barrel.
Technically, a reversal pattern of the Wolf Wave was formed on Brent's daily chart. A break of the resistance at $70.5 and $71.5 per barrel may become the basis for the formation of long positions with targets at $77.1 and $79.5. These targets are located on the 1-4 line. A prerequisite for the rally is the consolidation of quotes above $69.1.
Brent, Daily chart
