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Crude Oil Rally Short-Lived: Fundamentals Still Feeding the Bears

PART:
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Part 7
Crude Oil Rally Short-Lived: Fundamentals Still Feeding the Bears PART 7 OF 7

Crude Oil Trades below Key Moving Averages

Crude oil price trend

Global crude oil prices have been falling since June 2014. Crude oil prices have fallen 20% so far in 2016 and are close to a 12-year low. The appreciating dollar and rising US inventory are weighing on global crude oil prices.

Crude Oil Trades below Key Moving Averages

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Support and resistance levels 

Demand from China and India could benefit crude oil prices. The next resistance level for crude oil prices is $40 per barrel. Prices hit this mark in November 2015. On the other hand, long-term oversupply concerns could push crude oil prices lower. The next support level for crude oil prices is $30 per barrel. Prices tested this mark in 2004.

Crude oil price moving averages 

Crude oil is trading below 20-, 50-, and 100-day moving averages. The moving averages suggest prices could trend lower. However, top management from Continental Resources (CLR) suggests that oil prices could hit $60 per barrel by the end of 2016. On the other hand, Royal Bank of Scotland and Standard Chartered have given projections as low as $16 per barrel and $10 per barrel, respectively, for crude oil in 2016.

The EIA (U.S. Energy Information Administration) forecasts that WTI crude oil prices could average $38.54 per barrel and $47 per barrel in 2016 and 2017, respectively. Brent crude oil prices could average $40 per barrel and $50 per barrel in 2016 and 2017, respectively. The Federal Reserve Bank of Dallas has forecasted a range of $20–$30 per barrel for 2016.

The lower price forecasts for crude oil in 2016 will lower the revenues of major global oil producers such as PetroChina (PTR), China Petroleum & Chemical Corporation (SNP), ExxonMobil (XOM), Occidental Petroleum (OXY), Apache (APA), Royal Dutch Shell (RDS.A), and Petróleo Brasileiro SA Petrobras (PBR). The bearish oil market also impacts ETFs like the iShares U.S. Oil & Gas Exploration & Production ETF (IEO), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), and the PowerShares DWA Energy Momentum Portfolio (PXI).

To learn more about the oil market, read the series Why Crude Oil Bearish Traders Continue to Celebrate ahead of 2016.

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