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Crude Oil Market: Will Bullish Oil Traders Control 2017?

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Dec. 4 2020, Updated 10:52 a.m. ET

Price channel  

January WTI (West Texas Intermediate) crude oil futures fell for the third straight day yesterday. Prices fell below the key psychological levels of $42 per barrel on November 30. The OPEC meeting and US crude oil inventory data could be the key drivers for the crude oil market this week.

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Support and resistance 

The consensus of falling crude oil inventory could benefit crude oil prices. US crude oil prices could see resistance at $48 per barrel. Prices tested this mark in November 2015. In contrast, record production from Saudi Arabia and Russia lead crude oil prices to fall further. Oil prices could see support at $39 per barrel. Prices also tested this mark in November.

Crude oil price forecast  

Crude oil production has slowed down in 2H15, as compared to 1H15. US production fell, and Saudi Arabian and Iraq production fell marginally. However, Libya and Iran are planning to scale up production. Demand is slowing in South Korea and China, and overall all global markets are still oversupplied. If market demand picks up in 2017, we could see oil prices trade higher.

Citigroup projects that demand could rise in 2016 and 2017. It estimates that Brent oil prices will average at $51 per barrel in 2016 and $64 per barrel in 2017. Likewise, OPEC projects that crude oil prices could average around $80 per barrel by 2020. Société Generale estimates that crude oil prices could average at $49.40 per barrel in 2016. The narrow gap between supply and demand could benefit the oil market in 2017.

The rise in oil prices benefits oil producers like Chevron (CVX), Marathon Oil (MRO), Murphy Oil (MUR), and Apache (APC). ETFs like the iShares US Oil & Gas Exploration & Production ETF (IEO) and the PowerShares DWA Energy Momentum Portfolio (PXI) are impacted by the volatility in the energy market.

For an in-depth look at the oil and gas sector, visit Market Realist’s Energy and Power page.

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