WTI (West Texas Intermediate) crude oil futures contract for September delivery settled close to $45 per barrel for the third day. Prices resumed their long-term downward trend in yesterday’s trade. Crude oil prices have been fluctuating within this downtrend price channel for more than a month. The tug-of-war between falling crude oil inventories and refined products’ rising inventories are swinging crude oil prices.
Support and resistance
The long-term oversupply concerns, refined products’ rising inventories, and the strong dollar could drag crude oil prices lower. The key support for crude oil prices is seen at $44 per barrel. Prices tested this level in March 2015. In contrast, lower crude oil prices could support crude oil prices. The next resistance for crude oil prices is seen at $55 per barrel. Prices tested this level in July 2015.
The pessimistic sentiments and downtrend channel suggest that prices could fall more. In the short term, crude oil prices could fluctuate between $44 and $50 per barrel. The EIA (U.S. Energy Information Administration) forecasts that US crude oil prices could average around $55 per barrel in 2015 and $62 per barrel in 2016.
ETFs like the ProShares UltraShort Bloomberg Crude Oil (SCO) benefit from falling crude oil prices. In contrast, ETFs like the VelocityShares 3X Long Crude ETN (UWTI) benefit from rising crude oil prices.
The volatility in the crude oil market also impacts oil and gas producers like Pioneer Natural Resources (PXD), Anadarko Petroleum (APC), and ConocoPhillips (COP). Combined, they account for 9.65% of the Energy Select Sector SPDR ETF (XLE). These stocks’ crude oil production mix is more than 41% of their total production.