Crude oil experiences massive decline
WTI (West Texas Intermediate) crude oil has declined ~58% since June 2014. This decline has impacted oil companies and ETFs the most. Oil producers such as Oasis Petroleum (OAS) fell ~72% from the June 2014 highs. Oilfield equipment and services companies such as Weatherford International (WFT) declined ~54%.
Integrated oil companies and ETFs usually perform better because of their diversified operations or holdings. Chevron Corporation (CVX) and the Energy Select Sector SPDR (XLE) lost ~27% and ~19%, respectively, during this period. The United States Oil ETF (USO) is also down by ~56% from mid-June 2014.
Key support level of WTI crude oil
In the previous part of this series, we looked at the fundamental drivers that impact crude oil prices. Now we’ll use the charts to find the key support level of crude oil. To know more about charting and technical analysis, visit our technical analysis page.
On January 13, 2015, crude oil was trading at $45.91 per barrel. It has support at $42 to $44. The next support band is $40 to $42 if any bearish news triggers further. Then crude oil will drop to the next support level of $35 to $37. If crude oil continues its downtrend, it’s possible that crude oil might hit $32 per barrel, the price of crude oil in 2008 before the global financial crisis. This is the fastest decline of crude oil since that 2008 crash.
If WTI crude oil prices try to break above the $52 to $55 level again, there will be a lot of resistance. Strong fundamental drivers such as a large decline in supply would drive crude prices higher.
Due to the current oil glut and a weak demand, investors can expect crude oil prices to likely remain on a downward trend.
Read the next part of this series to know more about oil ETFs.
This article described the date when crude oil was trading at $45.19 per barrel as January 13, 2014, when it was originally published. The date has since been corrected to January, 13, 2015. We regret the error.