Brent Crude Oil Prices Come Close to a 13-Year Low
Will WTI Crude Oil Outperform Brent Crude Oil in 2016?
Crude oil price trend
Brent crude oil prices were near a 13-year low in early trading this morning. Likewise, WTI (West Texas Intermediate) crude oil is trading close to a 12-year low. Crude oil prices are following a long-term bearish trend and have fallen by 70% since June 2014. Rising production from Iran and turmoil in the Chinese economy are weighing on the crude oil market.
Key support
Pessimistic sentiment stemming from crude oil oversupply, the appreciating dollar, and record oil production from Russia and the Middle East will continue to put pressure on crude oil prices. Prices could see support at $27 per barrel. On the other hand, lower oil prices could boost consumption and support crude oil prices. The next resistance level for crude oil prices is $40 per barrel. Prices hit this mark in November 2015.
Crude oil price estimates
The latest forecast from Goldman Sachs suggests crude oil prices could reach $40 per barrel by the middle of 2016. In contrast, the firm estimates that crude oil prices could hit $20 per barrel in the worst case scenario. The EIA (U.S. Energy Information Administration) estimates that WTI 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. Nomura Holdings suggests that oil prices could test $25 per barrel in the short term. HSBC estimates that crude oil could trade between $25 and $40 in the next 12 months.
The long-term lower crude oil prices negatively affect the margins of upstream players like PetroChina (PTR), China Petroleum & Chemical Corporation (SNP), Chevron (CVX), Occidental Petroleum (OXY), ExxonMobil (XOM), and Petróleo Brasileiro SA Petrobras (PBR). 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) are also influenced by the ups and downs in the oil market.
Browse this series on Market Realist:
