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Crude Oil Prices Enter a Bull Market despite Chinese Fear Factors

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Part 5
Crude Oil Prices Enter a Bull Market despite Chinese Fear Factors PART 5 OF 5

Crude Oil Prices Fell from the Resistance Level

Crude oil price fall after breakout

NYMEX-traded WTI (West Texas Intermediate) crude oil futures contracts for October delivery fell from the key resistance of $49 per barrel on September 1, 2015. Yesterday, prices fell after a three-day rally that started on August 27. Lately, short covering and inventory data cues are influencing crude oil prices.

Crude Oil Prices Fell from the Resistance Level

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Support and resistance

The speculation of a slowdown in the US production and lower crude oil prices could support crude oil prices. US crude oil prices could see resistance at $50 per barrel. Prices hit this mark in August 2015. In contrast, a record stockpile could drag crude oil prices lower. The key support for US crude oil prices is seen at $38 per barrel. Prices hit this mark in August 2015.

The current momentum suggests that crude oil prices could fluctuate between $40 per barrel and $50 per barrel in the short term. In contrast, Citigroup forecasts that crude oil prices could hit $32 per barrel due to oversupply concerns. Goldman Sachs estimates that WTI prices could trade lower due to long-term oversupply concerns.

Oil and gas producers like Noble Energy (NBL), Pioneer Natural Resources (PXD), and Devon Energy (DVN) benefit from the recent rally in crude oil prices. Combined, they account for 6.25% of the Energy Select Sector SPDR ETF (XLE). These stocks’ crude oil production mix is greater than 41% of their total production.

The rise in crude oil prices also benefits ETFs like the Velocity Shares 3X Long Crude ETN (UWTI). In contrast, ETFs like the ProShares Ultra Short Bloomberg Crude Oil ETF (SCO) benefit from falling crude oil prices.

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