WTI (West Texas Intermediate) crude oil futures for December expiry rose for the first time in the last four days. Prices rebounded from the psychological level of $40 per barrel within the trading channel of $41–$48 per barrel on November 15, 2015. Prices have been trading within this channel for the past two weeks.
Support and resistance
Slowing US production and geopolitical tensions could drive oil prices higher. The next resistance for crude oil prices could be seen at $48 per barrel. The prices tested this mark in November 2015. On the other hand, oversupply concerns and the strong dollar could drag crude oil prices lower. Crude oil prices could see support at $39 per barrel. Price hit this mark in August 2015.
The depressed energy market is leading to mergers and acquisitions. Why? Lower crude oil prices impact the cash flows. Small and independent oil companies are on the verge of bankruptcy. Data compiled by Bloomberg showed that global oil giants have more than $0.5 trillion in both cash equivalents and stocks. The oil majors could use the money for more mergers and acquisitions. Oil majors like Shell (RDS.A), BP (BP), ExxonMobil (XOM), and Chevron (CVX) have $32.4 billion, $53 billion, $320 billion, and $65 billion in cash equivalents for mega-mergers in the volatile oil market.
OPEC (Organization of Petroleum Exporting Countries) expects oil prices to average around $80 per barrel over the long term. The EIA (U.S. Energy Information Administration) projects that crude oil prices could average around $50 per barrel in 2015 and $51 per barrel in 2016. The current turmoil in the energy market suggests that major investments banks like JPMorgan Chase, Goldman Sachs, and Citigroup could revise their crude oil forecast over the long term.
ETFs like the iShares US Oil & Gas Exploration & Production ETF (IEO) and the PowerShares DWA Energy Momentum ETF (PXI) are also affected by the ups and downs in the oil market.