WTI Oil Price: How Low Will It Go?

| August 4, 2015 | 0 Comments

WTI CrudeWTI Oil Price: How Low Will It Go?

No doubt about it, bears are back in full control of the oil market…

Over the past few weeks, the price of West Texas Intermediate (WTI) crude has plunged from the high $50 a barrel range to the current price near $45.

As I mentioned here, investors are focusing on multiple bearish factors including crashing Chinese stocks, heavy global supplies, and the looming end of the summer driving season.

Here’s a chart…

West Texas Intermediate (WTI) crude

As you can see, sellers are ruling the roost.  The recent downturn has the WTI oil price down 3.9% on the week and off by a staggering 20.9% over the past month.  On a year-to-date basis, the commodity is lower by 17%.

Where does crude go from here?

Notice in the chart above that the yearly low (red line) at $42.50 a barrel isn’t far off.  Given the commodity’s bearish momentum and ugly sentiment, it’s quite likely that price point will once again be realized.

And listen to this…

There’s a growing chorus of analysts proclaiming crude is about to crash into the $30 a barrel range.

What’s their reasoning?

Some believe the soaring US Dollar still has plenty of room to run, which will put continued pressure on WTI.  Others suggest the oversupply issues that have plagued the commodity since late last year, won’t alleviate any time soon.

While I won’t argue these bearish points, WTI crude is reaching drastically oversold levels on a short-term basis.

In fact, based on the Relative Strength Index (RSI), the last time crude was this oversold (in January 2015), it rallied a stunning 30% in a matter of weeks.  In case you’re unaware, the RSI is a very useful technical tool for measuring overbought and oversold areas in any market. 

With that said, is it time to bet on a crude market rally?

Not quite…

As I mentioned earlier, it’s likely WTI crumbles to the 2015 low set in March at $42.50.  But once that price level is hit, the odds favor some degree of relief rally.

How do you capitalize on this situation?

If you’re quick, you can catch the last little bit of WTI downside with the ETFs listed here and here. 

But don’t fall in love with your bearish positions…

Once $42.50 a barrel is realized, it’s very likely bulls stand up to challenge the recent dominance of crude market bears- and that’s precisely when you strike on the long side.

It’s tough to say just how much of a rally we’ll see from $42.50, but it’s quite likely bulls make a stand at that level! 

Until Next Time,

Justin Bennett

BIO:  Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com.  With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them.  Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.

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Category: Crude Oil, Energy

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.