WTI (West Texas Intermediate) crude oil futures contracts for January delivery fell for the second consecutive day within their trading channel on Friday, November 27, 2015. Prices fell from the key resistance level of $44 per barrel. Weak demand cues from China and the rising US dollar are weighing on crude oil prices.
If OPEC (Organization of the Petroleum Exporting Countries) maintains its collective target of 30 MMbpd (million barrels per day) in its December 4, 2015, oil prices could fall further. Prices could see key support at $39 per barrel. US crude oil tested this level in November 2015. In contrast, slowing US production and lower crude oil prices could support oil prices. Crude oil prices could see resistance at $48 per barrel. Prices also hit this level in November.
Crude oil forecast
OPEC projects that crude oil prices could average around $80 per barrel over the long term. The EIA (U.S. Energy Information Administration) expects that crude oil prices could average around $50 per barrel in 2015 and $51 per barrel in 2016. Oil prices are trading below key moving averages. This suggests prices could trade lower. The trading channel suggests prices could fall to the range of $39–$40 per barrel in the short term. Hedge funds and major oil giants like BP (BP) are bearish on crude oil prices.
Record-low crude oil prices impact the margins of oil producers like Pioneer Natural Resources (PXD), Marathon Oil (MRO), Murphy Oil (MUR), and Apache (APC). They also impact the performance of ETFs like the iShares US Oil & Gas Exploration & Production ETF (IEO) and the PowerShares DWA Energy Momentum Portfolio (PXI).
For an in-depth look at the oil and gas sector, visit Market Realist’s Energy and Power page.