Crude oil price trend
NYMEX-traded February WTI (West Texas Intermediate) crude oil prices have fallen a whopping 70% since June 2014 due to oversupply concerns. The falling trend doesn’t seem to have stopped, as crude oil prices have tested 12-year lows. Crude oil is trading close to the psychological mark of $30 per barrel, but the appreciating dollar and record supplies are putting pressure on oil prices.
Record production from Russia to the United States will put downward pressure on crude oil prices. The critical support level for crude oil prices is $30 per barrel. In 2016, prices have already dipped below this level, which was last seen in 2004. Short covering and bargain buying might support crude oil prices, which could see resistance at $40 per barrel. Prices tested this level in November 2015.
Crude oil price forecasts
Standard Chartered has given the worst forecast for crude oil, stating that crude oil prices could fall as low as $10 per barrel in 2016. In contrast, the EIA (U.S. Energy Information Administration) estimates that US crude oil prices could average $38.54 per barrel and $47 per barrel in 2016 and 2017, respectively. Brent crude oil prices could average $40 per barrel and $50 per barrel in 2016 and 2017, respectively. Morgan Stanley and Goldman Sachs suggest crude oil prices could hit $20 per barrel in 2016 as Iranian oil floods the market.
The pessimistic sentiment in the market is weighing on oil prices. However, uncertainty is nothing new for the oil market. The roller-coaster ride in oil prices affects oil producers like PetroChina (PTR), China Petroleum & Chemical Corporation (SNP), ExxonMobil (XOM), and Petróleo Brasileiro SA Petrobras (PBR). Volatility in the oil market also affects ETFs and ETNs like the iShares U.S. Oil & Gas Exploration & Production ETF (IEO), the VelocityShares 3x Long Crude Oil ETN (UWTI), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), and the PowerShares DWA Energy Momentum Portfolio (PXI).
To learn more about the oil market in 2016, read the series Why Crude Oil Bearish Traders Continue to Celebrate ahead of 2016.