crude oil further extends breakdown below previous range 806922015
<p>Crude oil (daily chart shown below) has further extended its recent breakdown below the previous trading range that had been in place throughout May and […]</p>
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Crude oil (daily chart shown below) has further extended its recent breakdown below the previous trading range that had been in place throughout May and June. In the process, the price of US crude oil has hit a new 11-week low.
This breakdown has been due to several factors relating both to persistent oversupply as well as fears of a potential decrease in demand for crude oil. Most recently, factors compounding oil’s slide include: last week’s US Energy Information Administration (EIA) report highlighting a surprise inventory increase of 2.4 million barrels; uncertainty regarding Greece’s financial future and potential for an exit from the euro; turmoil and volatility in the Chinese equity markets; and the threat of Iran further flooding the oil market if a nuclear deal that lifts sanctions is reached. Adding even further to these factors is the strong US dollar, which places pressure on prices of commodities like crude oil.
US oil, which represents the West Texas Intermediate benchmark for crude, had been trading in a relatively tight range bordered by $62 resistance to the upside and $57 support to the downside. This range consolidation occurred below a long-term downtrend line extending back to the highs around $107 back in June of last year.
The $57 trading range support level was broken down last week, on the first day of July, which coincided with the release of the EIA report. Subsequent trading days have seen a follow-through on this breakdown, and with fundamental conditions continuing to place excessive pressure on oil prices, it is difficult to foresee much of a respite in the decline for the near future.
Trading on Monday saw a further breakdown below $55 to dip slightly below the key $54 support level, hitting a new low. If crude oil continues to trade below $55, downside momentum on the current breakdown could push prices down further towards the $50 psychological support level.
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