Crude Oil Market: Will Goldman Sachs Be Right Again?
Downtrend price channel
WTI (West Texas Intermediate) crude oil futures contracts for October delivery are trading just above the nearest support of $44 per barrel as of September 11, 2015. Prices have been showing the emergence of a downward trending channel during the last ten trading sessions. The consensus of slowing US production and rising crude oil inventory are influencing crude oil prices.
The pessimistic sentiments of oversupply concerns could drag the prices lower. The next support is seen at $38 per barrel. Prices hit this mark in August 2015. In contrast, slowing US production and lower crude oil prices could benefit crude oil prices. Crude oil prices could see resistance at $50 per barrel. Prices hit this mark in August 2015.
Commerzbank of Germany estimates the prices could trade lower due to oversupply concerns. Societe Generale estimates that US prices could average around $49.40 per barrel in 2016. Like many banks and brokerages, Goldman Sachs (GS) also expects the prices to trade lower. However, it expects that crude oil prices could hit as low as $20 per barrel due to long-term oversupply concerns. Goldman Sachs added that the market is oversupplied more than the estimates. Also, the global inventories are at record levels. The slowing Chinese economy and longer-than-expected oversupply concerns could push the prices to a new era of lower crude oil prices.
In previous estimates, Goldman Sachs estimated that crude oil prices could hit $45 per barrel in October 2015. However, crude oil prices hit these levels early. So, there’s a possibility that crude oil prices could hit new lows, according to Goldman Sachs’ forecast. The EIA (U.S. Energy Information Administration) estimates that WTI prices could average $49.23 per barrel in 2015 and $53.57 per barrel in 2016.
The long-term lower crude oil prices affect crude oil producers like Pioneer Natural Resources (PXD) and Noble Energy (NBL). They account for 6.46% of the Energy Select Sector SPDR ETF (XLE). These stocks’ crude oil production mix is greater than 41% of their total production.
Falling crude oil prices benefit ETFs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO). In contrast, ETFs like the Velocity Shares 3X Long Crude ETN (UWTI) benefit from rising crude oil prices.
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