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Trend Is My Friend: Jim Rogers and Crude Oil

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Trading range 

NYMEX-traded WTI (West Texas Intermediate) crude oil futures contracts for November rose from the key support of $44 per barrel on October 2, 2015. Crude oil prices have been fluctuating between $44 and $47 per barrel since September 2015. The falling US production is driving crude oil prices.

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Key pivots 

Bullish traders say that lower crude oil prices and falling US production could support crude oil prices. Crude oil prices could see resistance at $50 per barrel. Prices tested this mark in August 2015. In contrast, bearish traders could see prices fall due to oversupply and weak demand cues. The next support for crude oil prices is at $38 per barrel. Prices hit this level in August 2015.

Jim Rogers says that oil prices are steady at $45 per barrel despite all of the negative news in the market. The Chinese slowdown and record production from the Middle East to Russia are putting pressure on oil prices. However, oil prices are steady at the current levels. It indicates that crude oil prices have rebounded and they could trend higher.

However, Goldman Sachs and Citigroup estimate that the worst is yet to come due to the massive oversupply concerns. The Energy Ministry of Russia estimates that crude oil prices could average around $52 per barrel in 2015 and $55 per barrel in 2016. The EIA (U.S. Energy Information Administration) estimates that US oil prices could average $49.23 per barrel in 2015 and $53.57 per barrel in 2016.

The roller coaster ride of the crude oil prices impacts energy producers like Pioneer Resources (PXD), Apache (APA), and Noble Energy (NBL). Combined, they account for 8.42% of the Energy Select Sector SPDR ETF (XLE). These companies’ crude oil production mix is greater than 32% of their production portfolio.

ETFs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO) are positively impacted by lower crude oil prices. In contrast, ETFs like the Velocity Shares 3X Long Crude ETN (UWTI) benefit from rising crude oil prices.

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