Prices cannot move in the same direction indefinitely. Any rally needs a break, and the oil market is no exception. As soon as OPEC announced an improvement in forecasts for world GDP by 0.3 percentage points to 5.1% and global demand by 200,000 b/d due to large-scale fiscal stimulus from Joe Biden and the active introduction of vaccines, black gold went to correction. The pullback continues for the third day in a row against the background of profit-taking by longs and the strengthening of the US dollar.

Rumors are spreading in the market that OPEC's reluctance to increase production will not only raise prices but will also contribute to an active return of American producers to the market. The current price level for WTI is enough for many of them to make a profit. The efforts of the cartel and allies, including Russia, are undermined by Iran, which hopes to lift US sanctions after Joe Biden comes to power. According to Bloomberg, China buys about 1 million b/d of oil from Tehran, bypassing American restrictions. The rest of the states are afraid of Washington's anger and do not take cheap oil.

The threat of an increase in supplies leads to a change in the conjuncture of the black gold market. If from mid-January it was in backwardation for most of the time, then in March it fell into the strongest contango since the beginning of the year, which signals an oversupply. Not all is well, and with global demand.

Dynamics of spreads for oil futures contracts

If active vaccination in the US (more than 100 million Americans received at least one dose of the vaccine) will contribute to accelerated economic growth, Europe, on the contrary, refuse injections. Germany, France, and Italy plan to suspend AstraZeneca injections due to the alleged serious side effects, although the WHO noted that no link between them and the vaccine was found. Because of Europe, global oil demand may not grow as fast as expected, which, along with an increase in supply, increases the risks of a correction in Brent and WTI.

The strengthening of the US dollar poses an equally serious problem for the "bulls" in the oil market. The USD is steadily moving upward led by the Treasury yields and if the Fed can't stop it all, things will only get worse. In my opinion, the Fed is not interested in either high debt market rates or a strong national currency. Jerome Powell will be able to put a spoke in the wheels of bond sellers, which will weaken the dollar. If we add to this the further recovery of the global economy, led by the US and China, it becomes clear that the potential for an oil rollback is limited.

Technically, a 1-2-3 reversal pattern is taking place on Brent's daily chart. The breakout of the support at $66.6 per barrel will increase the risks of developing a corrective movement for the North Sea grade towards $65, $63, and $ 62.2, where it should be bought. Thus, traders can use short-term sales, but there is no reason to doubt the strength of the upward trend, so you need to be ready to turn over at any time.

Brent, Daily chart