The price of oil has been on the decline for the past few years, but has it finally hit its lowest? The price per barrel of oil has been rallying bearishly, but on Jan. 20th, 2016 it hit a decade low at $27.71 a barrel. This low has since been forgotten as price today is $46.96 a barrel, but countless financial analysts are torn about what direction price is going to dominantly take. There are several analysts that say that price will return back to $30 a barrel, then head lower than previously seen.
From a technical standpoint, this is very unlikely. The last time the price of oil was this low was back in the week of Sept. 13th, 2003. However, this occurred over a decade ago and price has gone as high as $147.47 a barrel since then. The lowest price oil has been traded at is $10.35 a barrel and this occurred during the week of Dec. 12th, 1998. Oil has been trending predominately bullish since then and really starting rallying the week of Nov. 17th, 2001. The price of oil during this week was $16.94 a barrel and acts as a very strong psychological level of support. Have no fear, when inflation is calculated in (1.00:1.34), the psychological resistance lies at $22.70. In the unlikely event that the price does break below $27.71 a barrel, it shouldn’t break below that level of resistance. As of the week of Apr. 11th, 2016, oil production in the United States has dropped below 9 million barrels a day which further solidifies the bullish movement as we have to import more to fulfill our needs.
From a technical standpoint, it is also unlikely for oil to plummet back to the $27 region. The graph below is a weekly candle stick chart of WTI Crude Oil. The descending red trend line shows that the commodity overall is still bearish until the price breaks above $85 dollars a barrel. On the other hand, the black lines are Fibonacci retracement lines and oil has managed to break above the 50% line. This shows strong psychological bullish momentum. The three blue lines are a bullish Andrew’s Pitchfork and the purple lines are hourly support and resistance. All of these indicators add to the current bullish movement.
Trade ideas: since it is a little too late now, in the event that oil does go back to below $35 a barrel, it would be very reasonable to consider going long on oil based stocks on the New York Stock Exchange like Exxon Mobil. In this scenario Exxon Mobile has gone from $73.18 on January 20th, 2016 to $90.10 on May 19th, 2016.
Notice: The data and chart are of WTI Crude Oil on 5/13/16 and exact prices could vary. Exxon Mobil Corporation does not compensate Kugel Financial for their placement in this article. This article was written using technical analysis, not taking into place any fundamentals or economic influences.