WTI (West Texas Intermediate) crude oil futures contracts for October delivery fell from the nearest resistance of $40 per barrel on August 26, 2015. Prices are fluctuating between $38 and $40 per barrel for the fourth consecutive day. The tug-of-war between the falling crude oil inventory and rising refined products’ stock is weighing on crude oil prices.
Support and resistance
The falling crude oil stockpile and lower crude oil prices could support US WTI crude oil prices. The resistance for crude oil prices is seen at $50 per barrel. Prices tested this mark in August 2015. In contrast, refined products’ rising inventories could drag crude oil prices lower. The key support for crude oil prices is seen at $38 per barrel. Prices hit this mark in August 2015.
Crude oil prices could average around $49 per barrel in 2015 and $54 per barrel in 2016, according to the latest EIA (U.S. Energy Information Administration) forecast. In contrast, crude oil prices could hit $32 per barrel in the short term, according to Citigroup’s forecast. The downward trending channel suggests that crude oil prices could average around $33 per barrel and $43 per barrel in the short term.
ETFs like the ProShares Ultra Short Bloomberg Crude Oil ETF (SCO) are negatively impacted by rising crude oil prices. In contrast, ETFs like the Velocity Shares 3X Long Crude ETN (UWTI) have a positive impact on rising crude oil prices.
US upstream players like Marathon Oil (MRO), Pioneer Natural Resources (PXD), and Devon Energy (DVN) are affected due to volatile crude oil prices. Combined, they account for 6% of the Energy Select Sector SPDR ETF (XLE). These companies’ crude oil production mix is more than 41% of their total production.