Key Crude Oil Price Estimates for 2016
Crude Oil Market: China’s Government Is the Real Market Maker
Crude oil prices
NYMEX-traded WTI (West Texas Intermediate) crude oil futures contracts for February delivery are trading close to 2008 levels. Prices are following a long-term bearish trend. Pessimistic sentiment stemming from oversupply is putting pressure on the global commodity and crude oil markets.
Key support and resistance levels
The long-term oversupply concerns due to record production from OPEC (Organization of the Petroleum Exporting Countries), the United States, and Russia will continue to put pressure on the oil market. Crude oil prices could see a support level of $32 per barrel. Prices hit this mark in 2003. On the other hand, demand from India could support crude oil prices. The resistance level for crude oil prices is $40 per barrel.
Jim Rogers, a renowned American investor, says that the US Federal Reserve is the real trader in the global market. The near zero interest rate for almost a decade led to the availability of cheaper credit. Debt mounted across the United States and led to the global commodity collapse. Further, the World Bank has downgraded its global growth forecast for 2016, stating that China and Brazil could slow down this year. China is expected to grow by 6.7% in 2016, and India is expected to grow by 7.8% this year. The global economy is expected to grow by 2.9%.
Oil price estimates
The EIA (U.S. Energy Information Administration) estimates that WTI crude oil prices could average $51 per barrel in 2016. The IMF (International Monetary Fund) estimates that oil prices could fall by $5 per barrel as soon as Iranian oil floods the market. 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.
The catastrophic fall in crude oil prices affects oil producers like PetroChina (PTR), Occidental Petroleum (OXY), Eni (ENI), Royal Dutch Shell (RDS.A), Total (TOT), and Petróleo Brasileiro SA Petrobras (PBR). The volatility in the oil market also affects ETFs and ETNs like the iShares U.S. Oil & Gas Exploration & Production ETF (IEO), the Vanguard Energy ETF (VDE), and the VelocityShares 3x Long Crude Oil ETN (UWTI).
Check out our series Why Crude Oil Bearish Traders Continued to Celebrate ahead of 2016 to learn more about the crude oil market in 2016.
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