Today’s focus has been centered on the economic releases from the European Central Bank and Federal Reserve; the net effect is a weakening of the US dollar. Brent, like most commodities, is quoted in US dollars and will have seen downward pressure from the generic strength that the US dollar has received.
So why has Brent not found any support yet? As fears over Iraq persist, two of Libya’s largest oil terminals have come under government control and this has enabled Libya to increase its output considerably. The situation in Iraq is not good, but with 75% of Iraq’s oil being drilled in the south of the country and away from ISIS forces, they too have been able to provide a steady supply of oil to the market.
There are several unknown factors that may affect the economic situation: how long this will remain the case, and how stable are the two regions? At the moment the markets have already factored in unrest and disruption to the supply chain.
Looking at the charts, Brent is just above the 50-day moving average and hovering above the oversold level on the relative strength index. A move below the $110 level looks unlikely as these two factors combined should tempt buyers back in.