US Crude Oil Slips for Sixth Consecutive Week
We discussed last week about how the price of U.S. crude oil had been falling for its ninth consecutive day and had entered into bear market territory – generally defined as a decline of 20% or more from the most recent major peak. Well, it’s gotten significantly worse since last week. The price of light crude oil futures, as of Friday, has now fallen more than 25% from early October’s nearly four-year high of 76.90. In the process, price established a new one-year low this week and also tentatively broke down below a major uptrend channel going back almost three years, as shown on the chart above.
Oil Price Drivers
With both domestic and international output consistently on the rise, and global demand forecasted to decline, the slide in crude oil prices has been no major surprise. Though price was down overall again this week, however, crude prices received a small lift in the latter half of the week with expectations that OPEC may cut its output next month to deal with the oversupply situation. Oil traders are not entirely convinced, though, as to: 1) whether OPEC will cut supply by a significant enough amount, and 2) if such cuts will make any appreciable dent in the global supply glut.
The chart tells the whole bearish picture – U.S. crude oil fell into a correction (-10% or worse from the most recent peak) on October 18; crossed below its key 200-day moving average on October 23; fell into bear market territory (-20% or worse from the most recent peak) on or around November 8; and then tentatively broke down below its three-year rising trend channel, as mentioned, just this week on November 13.
What May Happen Next?
Crude oil has already shown all technical signs of a breakdown. Barring any drastic output cuts by OPEC next month, pressure on oil prices is likely to continue building.
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Senior Market Analyst at The Technicals
A veteran global macro trader/analyst, Bart focuses on major market moves in currencies, commodities, fixed income, and global equity indexes. Bart stresses inter-market correlations and dynamics while keeping a close eye on risk. He has published countless market analysis pieces and has been a guest expert for a variety of major financial media. Contact Bart