Crude oil rebounds from new five-year low
James Chen February 2, 2015 7:53 PM
<p>US crude oil (daily chart shown below), represented by the West Texas Intermediate (WTI) benchmark for light sweet crude, saw a substantial rebound of around […]</p>
US crude oil (daily chart shown below), represented by the West Texas Intermediate (WTI) benchmark for light sweet crude, saw a substantial rebound of around 8% on Friday, the last trading day of January.
This significant jump occurred a day after the embattled commodity dropped to a fresh five-year low well below $44, signalling a new and troubling extreme.
Price action early on Monday has shown a continuation of Friday’s momentum, pushing crude oil briefly back up above the $50 level.
While the current rebound is encouraging and suggests a possible bottoming, the move may be considered mostly technical for the time being, as the fundamentals of increasing supply and waning demand have changed only modestly. This change comes mostly from the US, as it has begun to scale back on new projects and exploration in the face of plunging oil prices.
If other major oil players continue to maintain high production levels, however, February could potentially see further declines in oil prices into the low 40s and possibly lower before potentially bottoming out further into the year.
The $35 level continues to serve as the most important major support level to the downside in the event of a further drop. On a continuation of the current rebound, the next major resistance target to the upside resides around the $55 level.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.