Crude oil price trend
WTI (West Texas Intermediate) crude oil futures contracts for February delivery have been trading within a narrow channel of $34–$38 per barrel in December 2015. Prices are trading close to 2009 levels. Prices slipped back from the key resistance level in yesterday’s trade, as weak global demand is weighing on crude oil prices.
Support and resistance
The long-term record supply and strong US dollar (UUP) may continue to drag US crude oil prices lower. The nearest support level for crude oil prices is $34 per barrel. In contrast, demand from India could support oil prices. The nearest resistance level for oil prices could be $40 per barrel.
The mild winter, the lifting of Iran’s sanctions, the strong dollar, weak demand from China, and record global inventory will continue to put pressure on oil prices. The IMF (International Monetary Fund) forecasts that oil prices could fall by $5 per barrel as soon as Iranian oil floods the market. Goldman Sachs (GS) estimates that in the worst case scenario, crude oil prices could reach $20 per barrel in 2016.
The EIA (U.S. Energy Information Administration) estimates that WTI crude oil prices could average $51 per barrel and Brent crude oil prices could average $56 per barrel in 2016. Moody’s estimates that WTI prices could average $40 per barrel and Brent oil prices could average $48 per barrel in 2016.
Energy producers like PetroChina (PTR), Occidental Petroleum Corporation (OXY), Eni (ENI), Royal Dutch Shell (RDS.A), Total (TOT), and Petrobras (PBR) would benefit from rising oil prices. A rise in oil prices would also affect ETFs such as 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.