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Crude Oil Trades Close to Resistance Level of $32 per Barrel

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Jan. 27 2016, Updated 10:28 a.m. ET

Crude oil price trend

US crude oil prices have risen by 18% in the last five trading sessions. They are close to the key resistance level of $32 per barrel. However, oil prices are still in a long-term bearish trend. Prices rallied from 13-year lows due to short covering and speculation of slowing production.

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Crucial support and resistance levels 

The cold weather forecast and robust demand from China and India could push crude oil prices higher. Crude oil prices could see resistance at $40 per barrel. Prices hit this mark in November 2015. However, the consensus of rising US crude oil inventory, the appreciating dollar, and record production from OPEC will likely put pressure on crude oil prices. The next support level for crude oil prices is $25 per barrel. Prices tested this mark in 2003.

Crude oil price estimates 

Oil broker PVM Oil expects crude oil prices to trade between $40 and $60 per barrel in 2016 if Russia and OPEC enter into an agreement, which isn’t likely, as covered in the previous part of this series. Further, oil companies like Hess (HES) suggest that lower oil prices will curb capital expenditure, and oil production will drop gradually. This would also lead to higher oil prices. The World Bank estimates that crude oil prices will trade around $37 per barrel in 2016.

The EIA forecasts that Brent crude oil prices could average $40 per barrel in 2016 and $50 per barrel in 2017. West Texas Intermediate crude oil prices could average $38.5 per barrel in 2016 and $47 per barrel in 2017.

The recent spike in crude oil prices benefits upstream players like Chevron (CVX), ExxonMobil (XOM), Total (TOT), ENI (E), Devon Energy (DVN), and Apache (APA). The ups and downs in the oil market also affect ETFs like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the iShares U.S. Oil & Gas Exploration & Production ETF (IEO), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO).

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