Will Crude Oil Prices Rise after Falling on Friday?



Downtrend channel

October WTI (West Texas Intermediate) crude oil futures fell for the second day after testing the resistance of $47 per barrel on September 18, 2015. Prices have been fluctuating within a trading channel of $44–$47 per barrel since early September 2015. The slowing US production and record global inventories are weighing on crude oil prices.

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Key pivots 

The slowing Chinese economic growth, Brazilian credit downgrade, Russian recessionary concerns, and Japanese economic slowdown could decrease the demand for crude oil in the oversupplied crude oil market. This could push oil prices lower. Crude oil prices could see support at $38 per barrel. Prices tested this mark in August 2015. In contrast, lower crude oil prices and slowing US crude oil production benefit crude oil prices. The nearest resistance for crude oil prices is seen at $50 per barrel. Prices hit this mark in August 2015.

Oil price estimates 

The oversupply concerns could push crude oil prices lower to $32 per barrel, according to Citigroup estimates. The EIA (U.S. Energy Information Administration) forecasts that that WTI crude oil prices could average around $49 per barrel in 2015 and $54 per barrel in 2016. The downward trending price channel suggests that crude oil prices could average between $42 and $48 per barrel in the near term.

The US upstream players like Anadarko Petroleum (APC), QEP Resources (QEP), and EOG Resources (EOG) are impacted by lower crude oil prices. These stocks account for 7.31% of the Energy Select Sector SPDR ETF (XLE). These stocks’ crude oil production mix is greater than 32% of their total production.

Rising oil prices benefit ETFs like the Velocity Shares 3X Long Crude ETN (UWTI). In contrast, falling crude oil prices benefit ETFs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO).


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