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What’s the New Bottom for Crude Oil Prices?

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Price channel

September WTI (West Texas Intermediate) crude oil futures contracts fell for the third consecutive day. Prices are trading close to the key support of $42 per barrel. They settled at $43.87 per barrel on August 7, 2015. Crude oil prices have been falling due to refined products’ build up in the oversupplied market.

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Key pivots

The falling US crude oil inventory and the long-term lower crude oil prices could support crude oil prices. The key resistance for US crude oil prices is seen at $52 per barrel. Prices hit this level in July 2015. In contrast, oversupply factors and the appreciating dollar could push crude oil prices lower. The nearest support for crude oil prices is seen at $41 per barrel. Prices hit this mark in January 2009.

The EIA (U.S. Energy Information Administration) estimates that crude oil prices could average around $55 per barrel in 2015 and $62 per barrel in 2016. The US crude oil price chart suggests that prices could fluctuate between $42 and $50 per barrel in the short term. Goldman Sachs estimates that crude oil prices could trade lower in the long term due to oversupply concerns.

The long-term lower prices benefit 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.

The uncertainty in the crude oil market also affects upstream players like Pioneer Natural Resources (PXD), Devon Energy (DVN), and ConocoPhillips (COP). They account for 7.65% of the Energy Select Sector SPDR ETF (XLE). These stocks’ crude oil production mix is more than 41% of their total production.

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