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Crude Oil Prices Show the Falling Wedge Pattern



Falling wedge pattern

NYMEX-traded September WTI (West Texas Intermediate) crude oil futures contracts show the emergence of the falling wedge pattern. Prices closed above the key support of $50 per barrel for the fourth consecutive day as of July 21, 2015. Oil prices have been fluctuating between narrow ranges of $50–$53 per barrel for the last ten days. The falling US oil stockpile and oversupply concerns are influencing WTI prices.

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Support and resistance

The long-term oversupply concerns and refined product inventory buildup could drag crude oil prices lower. The key support for crude oil prices is seen at $50 per barrel. Prices tested this level in July 2015. In contrast, falling US inventories could support oil prices. The next resistance for crude oil prices is seen at $55 per barrel. Prices tested this mark in July 2015.

The crude oil price chart suggests that if WTI prices break below the key support level of $50 per barrel, WTI might hit $47 per barrel. In contrast, if it breaks above $52 per barrel, it could hit $56 per barrel—according to the falling wedge pattern. Barclay’s bank expects WTI crude oil prices to average around $54 per barrel in 2015.

ETFs like the ProShares UltraShort Bloomberg Crude Oil (SCO) benefit from falling crude oil prices. In contrast, higher oil prices benefit ETFs like the VelocityShares 3X Long Crude ETN (UWTI).

Oil and gas producers like Penn Virgina (PVA), Continental Resources (CLR), and SM Energy (SM) are also affected by falling crude oil prices. Combined, they account for 5.90% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). These companies’ crude oil production mix is more than 38% of their production portfolio.


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