Will Crude Oil Prices Hit $45 per Barrel?



Down trending channel

NYMEX-traded September WTI (West Texas Intermediate) crude oil futures contracts are showing the emergence of a down trending channel. Prices have been fluctuating within this channel since the second week of July 2015. The massive supply consensus and inventories are influencing crude oil prices.

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Support and resistance

The long-term oversupply concerns, record inventories, sluggish demand, and the strong dollar could push crude oil prices lower. The key support for crude oil prices is seen at $44 per barrel. Oil prices tested this level in March 2015. In contrast, lower crude oil could support WTI prices. The nearest resistance for crude oil prices is seen at $55 per barrel. Prices tested this mark in July 2015.

The down trending channel suggests that prices could be between $47 per barrel and $50 per barrel in the short term. The recent estimates from World Bank suggest that crude oil prices could average $57 per barrel in 2015. Goldman Sachs estimates that crude oil prices could hit $45 per barrel in October 2015.

The long-term lower crude oil prices negatively impact ETFs like the VelocityShares 3X Long Crude ETN (UWTI). In contrast, it benefits ETFs like the ProShares UltraShort Bloomberg Crude Oil (SCO).

Oil and gas producers like EP Energy (EPE), Chevron (CVX), and QEP Resources (QEP) are also impacted by falling crude oil prices. Combined, they account for 5.92% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). These companies have a crude oil production mix that’s greater than 38% of their total production.


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