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Falling Wedge Pattern: WTI Crude Oil Could Hit $64 per Barrel

Gordon Kristopher

Inventory Draw-Downs and Middle East Unrest Boost Oil Prices

(Continued from Prior Part)

Falling wedge pattern

July WTI (West Texas Intermediate) crude oil futures show a falling wedge pattern. Prices broke above the downward sloping trend line on May 21, 2015. WTI prices have been fluctuating between $58 and $61 per barrel for the last couple of weeks. US crude oil inventory draw-downs are driving crude oil prices.

Key pivots

The recent surge in the oil price is supported by the worse-than-expected decline in crude oil inventories. This bullish momentum might push oil to the key resistance of $61 per barrel. Prices tested this mark last time in May 2015. In contrast, the consensus of massive production from OPEC (Organization of the Petroleum Exporting Countries) and the US will drive oil prices lower. The key support is seen at $55 per barrel. Prices hit this level in April 2015.

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The falling wedge pattern suggests that prices could hit $64 per barrel in the short term. WTI prices settled above their 20, 50, and 100-day moving average as of May 21, 2015. Meanwhile, Goldman Sachs’ surveys suggest that crude oil prices could hit $45 per barrel by October 2015.

The decline in crude oil prices benefits ETFs like the ProShares UltraShort Bloomberg Crude Oil (SCO). In contrast, ETFs like the VelocityShares 3X Long Crude ETN (UWTI) benefit from higher oil prices.

Oil and gas exploration stocks like Sanchez Energy (SN), Chevron (CVX), and Diamondback Energy (FANG) also benefit from increasing oil prices. These companies account for 6.03% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). These upstream players have a crude oil production mix that’s greater than 46% of their total production portfolio.

For the latest updates, visit Market Realist’s Crude Oil ETFs page.

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