Will Crude Oil Prices' 10% Gain Continue for the Rest of the Year? (Part 3 of 3)
Symmetrical triangle
WTI (West Texas Intermediate) crude oil futures for June delivery show the emergence of a symmetrical triangle pattern. Oil prices are trading at $58–$60 per barrel in the last three days. Oil prices are being driven by increasing OPEC (Organization of the Petroleum Exporting Countries) production and slowing US output.
Key pivots
The current bullish momentum could drive oil to the important resistance of $66 per barrel. Prices hit this level in May 2009. The consensus of declining US output will support oil prices. Inventories at Cushing were expected to decline last week. This will also support oil prices. However, oil prices haven’t been able to break levels of $60 per barrel. Prices tested the mark of $59.90 per barrel on May 1 and retreated.
There’s the consensus of rising inventory and high production from Saudi Arabia, Iraq, and Russia. This is adding pressure to the oil prices. The US dollar also appreciated against the basket of currencies. This put pressure on WTI oil prices. The key support for oil is at $55 per barrel. Prices tested this mark on April 13 and 14, 2015.
WTI oil futures for June settled above the 20, 50, and 100-day moving average as of May 4. The symmetrical pattern suggests that prices could move in either direction. In contrast, the 14-day RSI (relative strength index) is in overbought territory. Prices could correct from these levels.
Higher oil prices negatively impact ETFs like the ProShares Ultrashort Bloomberg Crude Oil (SCO). In contrast, they benefit the VelocityShares 3X Long Crude ETN (UWTI). Oil and gas stocks like Kosmos Energy (KOS), RSP Permian (RSPP), and Energy XXI (EXXI) also benefit from higher oil prices. These companies have a crude oil production mix that’s more than 65% of their total production. They account for 4.32% of the SPDR Oil and Gas ETF (XOP).
For the latest updates, visit Market Realist’s Crude Oil ETFs page.
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