WTI Oil Price: We’re In The $40s!

| January 7, 2015 | 0 Comments

WTI CrudeWTI Oil Price Seeks Out New 5 ½-Year Low…

Believe it or not, the WTI oil price sank below $50 a barrel earlier this week. Not since April 2009, when the US economy was grappling with the worst economic downturn since the Great Depression, has crude traded that low.

Without question, we’re witnessing a remarkable market reaction to the Organization of Oil Producing Countries’ (OPEC) decision to keep production steady in 2015.

As you may remember, the Middle East oil cartel announced their unwillingness to cut production in late November 2014.

Since then, oil has dropped nearly $25 a barrel.

What does the oil market have in store for investors in coming months?

Let’s take a look…

WTI Oil Price: More Downside

As long-time energy market enthusiasts remember, WTI crude traded as low as $33.55 in February 2009 before rebounding to the $50 area a few months later. Ultimately the commodity rallied to $115 by the spring of 2011.

And my point is?

From a technical standpoint, there’s a growing possibility oil may test those early 2009 lows. Thanks to the severe downdraft over the past six months, crude has retraced around 70% of the 2009 to 2011 rally.

See for yourself…

WTI Oil Price, a chart of crude oil

Here’s the deal…

When a market retraces at least 61.8% of a prior move, the odds grow dramatically for a full retracement of the previous move.

As a result, the odds are growing that we see oil drop to the lowest red line (100% retracement) sometime in early 2015.

Is a drop to that level a sure thing?

Of course not- there’s no such thing as a “sure thing” in investing.

But given the severity of the ongoing crude crash, the likelihood of continued downside is growing. In other words, the downside momentum is so enormous that prices could get carried to totally ridiculous price levels (as if they weren’t already).

And to be sure, if crude drops into the $30 range in coming months, it will be completely absurd.

But it will also be the buying opportunity of a lifetime…

When Will Bulls Finally Carry The WTI Oil Price Higher?

As I mentioned a few weeks ago, calling a bottom in the oil market is basically a fool’s errand right now. Since OPEC isn’t interested in propping up the market, market forces will ultimately decide where crude’s bottom is.

And since unadulterated market forces haven’t decided the price of oil for decades, there’s no telling where the absolute bottom is.

But one thing’s for certain…

The current drop has gone way beyond what global crude market fundamentals warrant.   

Let me explain…

The International Energy Agency (IEA) downgraded their 2015 global crude demand outlook by 230,000 barrels a day in early December. Not surprisingly, investors reacted bearishly to the news.

But remember, global oil demand will still grow this year. In fact, the IEA predicts crude demand will grow by 900,000 barrels a day!

Yet here we are with oil sinking to nearly 6-year lows in the $40 range.

Like I said earlier, it’s totally ridiculous.

While it may be another $15 lower, WTI crude oil will find a bottom. And when it does, we’ll have a remarkable bullish profit opportunity in the oil patch.

Until Next Time,

Justin Bennett
Commodity Trading Research

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.