Crude oil prices break below trading channel
August WTI (West Texas Intermediate) crude oil futures contracts broke below the important trading channel on July 6, 2015. Prices broke below this channel for the first time in the last two months. The consensus of the Greece debt trap, Chinese economic slowdown, and Iran nuclear talks are causing collateral damage to crude oil prices.
Support and resistance
Crude oil prices lost more than 10% in the last four trading sessions. This collateral damage might continue if demand from China and Europe doesn’t improve. Secondly, the Greece debt crisis might lead to a strong dollar. The strong dollar will continue to put pressure on crude oil prices. Massive production from the Middle East, Russia, the US, and Brazil will add to the oil glut. We could see more bloodbaths in the oil market. The next support for crude oil prices is seen at $50 per barrel. Prices tested this mark in April 2015. In contrast, summer demand could push crude oil prices higher. The key resistance for crude oil price is seen at $55 per barrel. Prices hit this mark in July 2015.
The trading range pattern broke below the support of $55 per barrel. This suggests that crude oil prices could hit $50 per barrel in the short term. Goldman Sachs estimates that crude oil prices could hit $45 per barrel by October 2015—led by the strong dollar and oversupply concerns. Jim Rogers, a famous investor and trader, expects crude oil prices to bottom in 2015. He expects that oil prices might hit $40–$50 per barrel in the near term. There’s a possibility of prices rebounding after a big price crash.
The crude oil market crash benefits ETFs like the ProShares UltraShort Bloomberg Crude Oil (SCO). In contrast, ETFs like the VelocityShares 3X Long Crude ETN (UWTI) benefit from rising crude oil prices.
Oil and gas producers like Triangle Petroleum (TPLM), Halcon Resources (HK), and Northern Oil and Gas (NOG) are also impacted by the exponential fall in crude oil prices. They account for 4.68% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). These stocks also have a crude oil production mix that’s greater than 38% of their production portfolio.