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Crude Oil Prices Move Close to Resistance Level

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Downtrend channel  

January WTI (West Texas Intermediate) crude oil futures contracts have been moving into a falling trending channel since October 2015. Prices are moving toward the resistance level of $43 per barrel within the channel. The OPEC meeting and geopolitical tension have been the key drivers of crude oil prices.

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Key pivots 

The consensus of rising US crude oil inventory for the ninth straight week and record global inventory should put pressure on crude oil prices. Crude oil prices could see support at $39 per barrel. Prices hit this mark in August 2015. On the other hand, geopolitical news could benefit crude oil prices. The next resistance level for oil is $48 per barrel. Prices tested this mark in November 2015.

Crude oil price forecast

The World Bank forecast that crude oil prices could average $52 per barrel in 2015. The EIA (U.S. Energy Information Administration) estimates that US WTI oil prices could average around $50 per barrel in 2015 and $51 per barrel in 2016. Meanwhile, Société Generale estimates that oil prices could average around $49.40 per barrel in 2016. Citigroup and Goldman Sachs speculate that crude oil prices could trade lower due to record inventory and oversupply.

The crude oil price chart above suggests oil prices could oscillate between $39 per barrel and $45 per barrel. Prices are also trading below the 20-day, 30-day, and 50-day moving averages. These averages suggest that WTI prices could trade lower. Long-term lower crude oil prices impact the profitability of oil producers such as BP (BP), ConocoPhillips (COP), Chevron Corporation (CVX), Royal Dutch Shell (RDS.A), and Occidental Petroleum Corporation (OXY).

ETFs such as the iShares US Oil & Gas Exploration & Production ETF (IEO) and the PowerShares DWA Energy Momentum Portfolio (PXI) are also impacted by the rises and falls in energy prices.

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