Narrow trading range
WTI (West Texas Intermediate) crude oil futures contracts for August delivery closed below $52 per barrel for the first time in the last five days on July 15, 2015. Prices have been oscillating in a narrow trading range of $51 and $53 per barrel. Oversupply concerns and declining US oil inventories are swinging crude oil prices.
Support and resistance
Bearish sentiment is dragging crude oil prices lower. Iran’s nuclear deal and oversupply concerns are also dragging crude oil prices lower. The key support for WTI is at $50 per barrel. Prices hit this mark in April 2015. On the other hand, declining US inventories might boost crude oil prices. The next resistance for WTI is at $55 per barrel. Prices tested this level in July 2015.
The rectangular trading range suggests that crude oil prices could oscillate between $50 and $55 per barrel in the short term. The EIA (U.S. Energy Information Administration) estimates that crude oil prices could average around $55 per barrel in 2015.
ETFs like the ProShares UltraShort Bloomberg Crude Oil (SCO) benefit from declining crude oil prices. In contrast, increasing crude oil prices benefit ETFs like the VelocityShares 3X Long Crude ETN (UWTI).
Falling crude oil prices also affect oil and gas producers like Energy XXI (EXXI), Penn Virginia (PVA), and Clayton Williams Energy (CWEI). Combined, these companies account for 5.29% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). The crude oil production mix of these companies is greater than 38% of their total production.