Morgan Stanley Further Downgrades Crude Oil Prices for 2016
Short-term trend in crude oil prices
Crude oil prices have fallen 16% in 2016 and more than 70% since June 2014. The short-term and long-term trends of crude oil prices are still bearish. The depreciating dollar and rising US inventories are affecting crude oil prices.
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Key support and resistance levels
Record production from the Middle East to Russia will continue to put pressure on crude oil prices. Crude oil prices could see a support level of $25 per barrel. Prices tested this mark in 2003. However, rising demand from China, specifically from Chinese teapot refiners, could benefit crude oil prices. The next resistance level is $37 per barrel. Prices tested this level in November 2015.
Crude oil price forecast
Morgan Stanley has forecast that Brent crude oil prices could average $31 per barrel in 1Q16 and $30 per barrel in both 2Q16 and 3Q16. The previous forecast was $42, $45 and $48 in 1Q16, 2Q16, and 3Q16, respectively.
The EIA (U.S. Energy Information Administration) estimates that Brent crude oil prices could average as much as $40 per barrel in 2016 and $50 per barrel in 2017. WTI (West Texas Intermediate) crude oil prices could average $38.50 per barrel in 2016 and $47 per barrel in 2017. Bloomberg surveys suggest that WTI crude oil could hit as high as $46 per barrel in 4Q16. Brent crude oil prices could hit $48 per barrel.
Long-term lower crude oil prices and bearish sentiment would put pressure on upstream players like Total (TOT), Eni (E), BP (BP), PetroChina (PTR), Petróleo Brasileiro SA Petrobras (PBR), Chevron (CVX), and Apache (APA).
ETFs like the ProShares Ultra Bloomberg Crude Oil ETF (UCO), the iShares U.S. Oil & Gas Exploration & Production ETF (IEO), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO) are also influenced by the ups and downs in the crude oil market.
For related analysis of the crude oil market, read Will Russia and OPEC Join Hands and Cut Crude Oil Production?