Crude oil prices follow a long-term trend
Crude oil prices have fallen almost 29% in 2016. Prices have fallen to 12-year lows. They’re following a long-term bearish trend. Fading OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC ties for a collective crude oil production cut and the US weekly inventory report are putting pressure on crude oil prices.
China’s slowing economy and record oil in land and sea will continue to put pressure on crude oil prices. Oil prices could test $25 per barrel. Prices hit this level in 2003. Many technical analysts suggest that crude oil prices could hit this mark in the currently depressed crude oil market. On the other hand, oil prices could rally due to short covering and bargain buying. Prices could see resistance at $31 per barrel. Prices hit this mark in January 2016.
Crude oil price forecast
Bearish crude oil traders continued to accumulate crude oil put options with the strike price of $25 per barrel. Oil traders will see a profit if oil prices fall below $25 per barrel. The U.S. Energy Information Administration forecasts that Brent crude oil prices could average $38 per barrel in 2016 and $50 per barrel in 2017. WTI (West Texas Intermediate) oil prices could average $38 per barrel in 2016 and $50 per barrel in 2017. Bloomberg surveys suggest that WTI oil could hit as high as $46 per barrel in 4Q16. Brent crude oil prices could hit $48 per barrel. Standard Chartered estimates that oil prices could hit $10 per barrel in the worst-case scenario in 2016.
Crude oil prices have fallen more than 75% since June 2014. Historically low oil prices impact oil producers’ profitability like Laredo Petroleum (LPI), Whiting Petroleum (WLL), Carrizo Oil & Gas (CRZO), Synergy Resources (SYRG), Pioneer Natural Resources (PXD), and RSP Permian (RSPP). ETFs such as the SPDR S&P Oil & Gas Equipment & Services (XES), the ProShares Ultra Bloomberg Crude Oil ETF (UCO), the Direxion Daily Energy Bull 3x (ERX), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO) are also influenced by the ups and downs in the crude oil market.
Read China’s Crude Oil Imports: Teapot Refiners Will Be Key Catalysts and Will Russia and OPEC Join Hands and Cut Crude Oil Production? for related analysis.