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Oil bears in control as Brent tests 11 years low

With eight trading days remaining for 2015, Oil will be the most watched asset class that will provide guidance

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
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Traders have likely entered the holiday mode, as many market participants already away for Christmas after a very busy December. With eight trading days remaining for 2015, Oil will be the most watched asset class that will provide guidance.

Brent fell today to 11 years low after breaking below 2008 $36.20, and despite some producers considering current price levels extremely oversold, we can still argue that additional pressure can bring prices to even lower levels. The factors have not changed a lot “global oil glut, new supplies, increasing inventories, short positioning, shale oil production, and record production from Russia and OPEC members, Iran comeback…” These same factors we hear repeatedly with every time oil prices drop and professional trader know very well that if you already know the factors affecting an asset price it should be already priced in.

Recent developments not fully prices in:

According to Baker Hughes, 17 rig counts are back to work in the week ending December 18, a sign that some drillers are accommodating with low oil prices and it could become a debate whether technology development will reduce the cost price production in the near term, to keep the U.S. producing at high levels. Meanwhile U.S crude stockpiles expanded unexpectedly last week to 490.7 million barrels the most since 1930, another worrying sign that inventories are operating at very high capacity and the unexpected warm winter due in part to the El Nino weather phenomenon not likely to drag inventory levels as anticipated. To add some additional pressure the U.S. voted to lift a 40-year-old ban on crude exports which could see its excess production dumped on the already over supplied market.

Although its’s almost impossible to call a bottom for prices $34.55 – $35.3 (Mar 2003, and October 2000 Highs) are likely to play immediate support if Brent prices fell below $36.

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CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.