Declining Brent and the New Energy Paradigm
By Ion Jauregui - ActivTrades Analyst
Yesterday, marked by uncertainty and transformation in the energy sector, Brent crude oil for April delivery closed the London futures market session down 0.67% at $72.53 a barrel. This drop, which translated into a fall of 0.49 dollars with respect to the last trading on the Intercontinental Exchange (NYSE:ICE) - where the price had reached 73.02 dollars - reflects the volatility that currently characterizes the energy markets. Brent, considered the European oil benchmark, is experiencing fluctuations that respond both to geopolitical factors and to the strategic decisions of the major oil companies. In this context, there were important news on the international scene: the President of the United States, Donald Trump, and the Ukrainian President, Volodymir Zelenski, plan to sign this Friday an agreement in which Ukraine will share its natural resources. According to sources, this pact aims to bring about a “secure peace” in the country, which could redefine the flow of energy supplies and, in turn, impact the stability of crude oil prices.
On the other hand, the reorientation of BP's corporate strategy adds another layer of complexity to the scenario. The British oil company announced that it will reduce its investments in renewable energies, figures that reached 5 billion dollars a year (approximately 4.75 billion euros), to focus on increasing crude oil and gas production. This strategic shift is part of the search for higher operating profits, in a context in which the energy transition has generated debates on the short and medium-term profitability of sustainable investments versus the traditional hydrocarbon business. BP's decision could be interpreted as a sign that, despite growing pressures to adopt cleaner energy sources, some market players are choosing to consolidate and leverage their operations in the fossil fuel sector. The strategy of cutting investments in renewables in favor of oil and gas production not only seeks to improve profit margins, but also to take advantage of the current situation of moderate market prices, despite the fluctuations evident in futures.
The combination of these factors-the imminent signing of the Trump-Zelenski deal and BP's reorientation-suggests that the oil market is at an inflection point. On the one hand, the Ukraine deal could have implications for supply and, potentially, natural resource geopolitics, while on the other, BP's strategy could incentivize other companies to rethink their investments in the context of an accelerated energy transition.
Technical analysis
If we look at the chart it is possible to see that on February 3rd, 11th and 20th we have witnessed three resistances in oil's attempts to move up and recover price positions. The bearish slide initiated on the 20th has been prolonged until Monday, yesterday being a sideways day, the Asian session and today's European opening seems to have kept the price unchanged. Looking at the crosses of averages we have a bearish cross of averages started last Friday that has been widening its space. The RSI has marked a recovery from the excessive oversold 20% of the afternoon session and currently marks a recovery zone at 45.81%. It appears that the Christmas supports at $71.61 are holding for the time being after yesterday's small bounce. It is very likely that Trump's move will continue to pressure through tariff releases a bearish oil value to directly penalize the BRICs group countries very dependent on this particular asset.
While the 0.67% decline in Brent may appear moderate, taken together with these developments, it reflects a juncture in which political uncertainty and strategic restructuring are combining to influence prices. The evolution of these factors will be decisive in determining the direction of the market in the coming weeks, both in terms of supply and demand. All in all, today's trading day evidences a changing energy landscape, with political and corporate players reconfiguring their strategies in the face of an increasingly dynamic and complex global environment. With the natural resources agreement on the horizon and BP's renewed commitment to hydrocarbons, the oil sector is preparing to face new challenges and opportunities in an era of change. Tomorrow's trading day will be relevant to see the U.S. oil inventories that can move the energy market.
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
Yesterday, marked by uncertainty and transformation in the energy sector, Brent crude oil for April delivery closed the London futures market session down 0.67% at $72.53 a barrel. This drop, which translated into a fall of 0.49 dollars with respect to the last trading on the Intercontinental Exchange (NYSE:ICE) - where the price had reached 73.02 dollars - reflects the volatility that currently characterizes the energy markets. Brent, considered the European oil benchmark, is experiencing fluctuations that respond both to geopolitical factors and to the strategic decisions of the major oil companies. In this context, there were important news on the international scene: the President of the United States, Donald Trump, and the Ukrainian President, Volodymir Zelenski, plan to sign this Friday an agreement in which Ukraine will share its natural resources. According to sources, this pact aims to bring about a “secure peace” in the country, which could redefine the flow of energy supplies and, in turn, impact the stability of crude oil prices.
On the other hand, the reorientation of BP's corporate strategy adds another layer of complexity to the scenario. The British oil company announced that it will reduce its investments in renewable energies, figures that reached 5 billion dollars a year (approximately 4.75 billion euros), to focus on increasing crude oil and gas production. This strategic shift is part of the search for higher operating profits, in a context in which the energy transition has generated debates on the short and medium-term profitability of sustainable investments versus the traditional hydrocarbon business. BP's decision could be interpreted as a sign that, despite growing pressures to adopt cleaner energy sources, some market players are choosing to consolidate and leverage their operations in the fossil fuel sector. The strategy of cutting investments in renewables in favor of oil and gas production not only seeks to improve profit margins, but also to take advantage of the current situation of moderate market prices, despite the fluctuations evident in futures.
The combination of these factors-the imminent signing of the Trump-Zelenski deal and BP's reorientation-suggests that the oil market is at an inflection point. On the one hand, the Ukraine deal could have implications for supply and, potentially, natural resource geopolitics, while on the other, BP's strategy could incentivize other companies to rethink their investments in the context of an accelerated energy transition.
Technical analysis
If we look at the chart it is possible to see that on February 3rd, 11th and 20th we have witnessed three resistances in oil's attempts to move up and recover price positions. The bearish slide initiated on the 20th has been prolonged until Monday, yesterday being a sideways day, the Asian session and today's European opening seems to have kept the price unchanged. Looking at the crosses of averages we have a bearish cross of averages started last Friday that has been widening its space. The RSI has marked a recovery from the excessive oversold 20% of the afternoon session and currently marks a recovery zone at 45.81%. It appears that the Christmas supports at $71.61 are holding for the time being after yesterday's small bounce. It is very likely that Trump's move will continue to pressure through tariff releases a bearish oil value to directly penalize the BRICs group countries very dependent on this particular asset.
While the 0.67% decline in Brent may appear moderate, taken together with these developments, it reflects a juncture in which political uncertainty and strategic restructuring are combining to influence prices. The evolution of these factors will be decisive in determining the direction of the market in the coming weeks, both in terms of supply and demand. All in all, today's trading day evidences a changing energy landscape, with political and corporate players reconfiguring their strategies in the face of an increasingly dynamic and complex global environment. With the natural resources agreement on the horizon and BP's renewed commitment to hydrocarbons, the oil sector is preparing to face new challenges and opportunities in an era of change. Tomorrow's trading day will be relevant to see the U.S. oil inventories that can move the energy market.
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
כתב ויתור
המידע והפרסומים אינם אמורים להיות, ואינם מהווים, עצות פיננסיות, השקעות, מסחר או סוגים אחרים של עצות או המלצות שסופקו או מאושרים על ידי TradingView. קרא עוד בתנאים וההגבלות.
כתב ויתור
המידע והפרסומים אינם אמורים להיות, ואינם מהווים, עצות פיננסיות, השקעות, מסחר או סוגים אחרים של עצות או המלצות שסופקו או מאושרים על ידי TradingView. קרא עוד בתנאים וההגבלות.