Rectangular trading range
August WTI (West Texas Intermediate) crude oil futures hit a two-month low on July 1, 2015. Prices have been fluctuating between $58 and $61 per barrel over the last two months. Prices tested the key support of $56 per barrel yesterday and broke below this price channel. Strong summer demand and massive supply estimates are impacting crude oil prices.
Support and resistance
Crude oil prices resumed their long-term downward trend yesterday. Bearish oversupply factors and Iran’s nuclear deal could drag WTI prices lower. The nearest support for crude oil is at $55 per barrel. Prices tested this level in April 2015. In contrast, summer demand and rising demand from Asia could support crude oil prices. The next resistance for crude oil prices is at $66 per barrel. Prices hit this level in May 2009.
According to the crude oil charts, WTI prices could fluctuate broadly between $55 and $64 per barrel in the short term. Oversupply factors and the strong dollar could push crude prices lower to $45 per barrel by October 2015, according to Goldman Sachs’ consensus.
ETFs like the VelocityShares 3X Long Crude ETN (UWTI) are negatively impacted by lower crude oil prices. In contrast, lower crude oil prices benefit ETFs like the ProShares UltraShort Bloomberg Crude Oil (SCO).
Oil and gas producers like Northern Oil and Gas (NOG), Denbury Resources (DNR), and Triangle Petroleum (TPLM) are also impacted by lower WTI prices. They account for 4.37% of SPDR S&P Oil & Gas Exploration & Production ETF (XOP). These stocks also have a crude oil production mix that’s more than 38% of their total production.