Bottom Fishing: Crude Oil Prices Rise for the Second Day



Trading channel breakout 

November WTI (West Texas Intermediate) crude oil prices have been trading above $48 per barrel for the past two days. Prices broke above the one-month trading channel on October 8, 2015. The falling crude oil rigs and slowing US production are driving crude oil prices.

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Key pivots 

The long-term pessimistic oversupply sentiments will drag crude oil prices lower. The next support for crude oil prices is seen at $38 per barrel. Prices hit this mark in August 2015. On the other hand, slowing US production and the improving demand consensus could support crude oil prices. Prices could test the resistance at $52 per barrel. Prices tested this mark in July 2015. Bottom fishing and short covering could also push crude oil prices higher.

OPEC (Organizational of the Petroleum Exporting Countries) forecasts that crude oil prices could average around $80 per barrel in the long term. Societe Generale estimates that US WTI prices could trade around $49.40 per barrel in 2016. However, Goldman Sachs and Citigroup estimate that the worst is yet to come due to massive oversupply concerns. The EIA (U.S. Energy Information Administration) estimates that crude oil prices could average $50 per barrel in 2015 and $55 per barrel in 2016.

The roller coaster ride of crude oil prices impacts oil producers like Occidental Petroleum (OXY), ConocoPhillips (COP), and Marathon Oil (MRO). Occidental Petroleum and ConocoPhillips account for the 5.5% of the iShares Global Energy ETF (IXC). These companies’ crude oil production mix is more than 32% of their total production. The volatility in oil prices impacts ETFs like IXC and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO).


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