Crude oil prices will move lower as the oil glut continues. Now, that is just my opinion. I believe that crude oil prices will likely retest the $40 level and perhaps even revisit the $35 range. I’m not alone in this idea of lower crude oil prices moving forward. Today, Goldman Sachs has lowered their crude oil price forecast for the fourth quarter to $43 a barrel. I don’t believe for a second that the members of OPEC can reach an agreement to freeze production at current levels, much less actually cut production. Therefore when traders accept this fact, I think crude prices will have another leg down to test the $40 level. We all know that markets tend to over reach and that’s why I think that it’s possible to see crude prices as low as $37.50 to $35.00.
The crude oil market will not be able to re-balance supply and demand without more pain for the smaller suppliers. Nobody will willingly give up their market share. Iran will try to increase production. Saudi will not cut or freeze production at current levels, and North American production is not going away. OPEC is no longer in control of crude oil supplies. It is a whole new ballgame. Crude oil prices are likely to remain low, $40 to $50 range, unless some unforeseen event interrupts supplies from the Middle East.
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Frank J. Cholly
Senior Market Strategist
Frank brings his clients more than twenty-six years of commodity futures experience. He was a member at the Chicago Board of Trade for 10 years where he filled orders in the grain and financial pits. Frank was also a Lind-Waldock's floor manager for ten years and later joined on as a commodities broker.