February WTI (West Texas Intermediate) crude oil prices are following a long-term falling trend. However, prices are trading close to the key resistance level, as short covering and bargain buying have been driving oil prices higher.
The next support level for crude oil prices is $34 per barrel. Prices hit this level in December 2015. Massive production from Russia and the Middle East could push oil prices lower. On the other hand, rising demand from China and India could support oil prices. The important resistance level for crude oil prices is $40 per barrel.
Oil prices are below their 20-, 50-, and 100-day moving averages. The moving averages and the price chart above suggest oil could trade lower. Scotiabank estimates that crude oil could trade below $50 per barrel for the next two years and that oil prices may average $40–$45 per barrel in 2016 and $45–$50 per barrel in 2017. Meanwhile, the EIA (U.S. Energy Information Administration) estimates that WTI crude oil prices could average $51 per barrel in 2016. Brent crude oil prices could average $56 per barrel in 2016.
Long-term low crude oil prices impact the margins of upstream players such as PetroChina (PTR), Occidental Petroleum (OXY), Royal Dutch Shell (RDS.A), Total (TOT), and Petrobras (PBR). They also influence ETFs like the iShares US Oil & Gas Exploration & Production ETF (IEO) and the PowerShares DWA Energy Momentum Portfolio (PXI).
To learn more about the oil market in 2016, read the series Crude Oil Market: Is the Biggest Risk of 2016 Getting Bigger?