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Triple Top Pattern: Crude Oil Prices Could Decline


Dec. 4 2020, Updated 10:52 a.m. ET

Triple top pattern

WTI (West Texas Intermediate) crude oil futures for July delivery show the emergence of the triple top pattern. Prices have been fluctuating between $58 and $61 per barrel for almost one month. The appreciating US dollar and stockpile data would be the key catalysts for crude oil prices in the near term.

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Support for crude oil prices

WTI crude oil prices are declining for the third day in a row. The bearish sentiments could push oil to test the support of $55 per barrel. Prices tested this level in April 2015. The strong dollar and overproduction will put pressure on crude oil prices. In contrast, increasing demand from China and Japan will support crude oil prices. WTI could see resistance at $61 per barrel. Prices hit this level in May 2015.

The triple top pattern suggests that if oil prices break below $57 per barrel, then they could hit the $52–$53 per barrel level. The rectangular trading range pattern suggests that oil could fluctuate broadly between $55 and $64 per barrel in the near term. July WTI futures are trading above their 50-day moving average of $56.73 per barrel. WTI could average around $54 per barrel in 2015 and $59 per barrel in 2016, according to JPMorgan Chase forecasts. Goldman Sachs’ surveys suggest that WTI could hit $45 per barrel by the end of October 2015—led by the appreciating dollar and overproduction.

Lower oil prices are positive for ETFs like the ProShares UltraShort Bloomberg Crude Oil (SCO). In contrast, higher WTI prices benefit ETFs like the VelocityShares 3X Long Crude ETN (UWTI).

Declining oil prices impact upstream oil companies like Energy XXI (EXXI), ConocoPhillips (COP), and VAALCO Energy (EGY). These stocks account for 5.94% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). They have a crude oil production mix that’s more than 46% of their total production portfolio.


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