Crude Oil Price Forecasts Suggest More Pain for Oil Prices
Oil price trend
February WTI (West Texas Intermediate) crude oil futures contracts trading in NYMEX tested a new low on January 12, 2016. It traded below $30 per barrel for the first time in the last 12 years. Crude oil prices are trading within a falling channel. The US inventory and Chinese turmoil are swinging the crude oil prices.
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Key support levels
Record production from Russia, OPEC (Organization of the Petroleum Exporting Countries), the war of words within OPEC members, and the appreciating dollar will drag crude oil prices lower. The crucial support for crude oil prices is seen at $30 per barrel. We saw this in 2004. The slowing US production and falling crude oil inventory could benefit crude oil prices. We covered the US crude oil inventory data in the second part of the series. Crude oil prices could see key resistance at $40 per barrel. Prices tested this level in November 2015.
Crude oil price forecast
JPMorgan Chase and Goldman Sachs suggest that crude oil prices could test $20 per barrel in 2016. Meanwhile, Royal Bank of Scotland suggests that crude oil prices could test $16 per barrel. Standard Chartered suggests that oil prices could hit $10 per barrel in the worst-case scenario. The Federal Reserve Bank of Dallas suggests that oil prices could trade between $20 and $30 per barrel in 2016. Iran estimates that crude oil could trade at $35–$50 per barrel in 2016. The EIA (U.S. Energy Information Administration) estimates that WTI crude oil prices could average $38.54 per barrel and $47 per barrel in 2016 and 2017. Brent crude oil prices could average $40 per barrel and $50 per barrel in 2016 and 2017. Danske Bank estimates that crude oil prices could test $25 per barrel before crude oil producers get serious about curbing the oil production.
It’s important to note that 12-year low oil prices have a negative impact on oil and gas producers’ profitability like PetroChina (PTR), Occidental Petroleum (OXY), Apache (APA), Royal Dutch Shell (RDS.A), and Petrobras (PBR). The volatility in the oil market also impacts ETFs like the iShares US Oil & Gas Exploration & Production ETF (IEO) and the PowerShares DWA Energy Momentum Portfolio (PXI).
To learn more, read Why Crude Oil Bearish Traders Continued to Celebrate ahead of 2016.