Commodities | Sep 16 2008
By Rudi Filapek-Vandyck
There’s no smirk on my face as I write this story, and neither am I going to spend a lot of “told you so” sentences on this matter. Crude oil has left US$100-plus per barrel behind and the outlook is for lower price levels still. Exactly as I and my colleagues here at FNArena have been saying it would.
We can only hope you took note of our warnings over the past months, and didn’t fall in love with the obvious “take it to the moon” expectations expressed elsewhere.
Last night crude oil futures fell to US$95.71 per barrel (West Texan Intermediate).
Chartists at Barclays Capital sensed perfectly what the world is looking for now, and thus they provided some guidance. Oil should be destined for a range between US$95-84 per barrel, they say. Hence a little lower from here is the least that should be expected.
However, as nothing ever remains without consequences, the fact that oil has now crashed through the pivotal US$100 price mark should flush out some of the weaker hands in the market. Barclays chartists therefore believe 10-15% of further downside should be considered “normal”. This implies that crude oil could well sink below US$90 per barrel and head for the lower end of the chartists’ predicted new trading range.
Nothing is ever set in stone, however, and there are things you simply cannot dismiss, such as the possibility that oil prices could well fall further than currently anticipated. The chartists state that a scenario that sees crude oil break through support at US$84 per barrel would open up the gates to US$71 per barrel. So-called “cloud support” (look up: Ichimoku) is currently located at US$60 per barrel.
Just in case you wondered: technical resistance is now at US$100-102 per barrel.