February crude oil futures have cratered, falling to $42.51 per barrel in early December from $148.17 on July 11. “It feels like this market is putting in a bottom,” says Joseph P. Marshall, analyst/trader for Pitguru.com. He says demand will return when prices are low enough, but that crude’s eventual move up will be slow and gradual. In January he says support is between $38 and $40, resistance is $60.
Raymond Carbone, president of Paramount Options, attributes low prices to the global recession and slack demand across the globe, but especially in emerging markets, adding that 7% GDP growth in China is akin to a contraction after 12% to 15% growth for the past five years. The stronger U.S. dollar also is driving down the cost of oil and other commodities, and that will continue to suppress energy prices as the European Central Bank and the Bank of England cut interest rates. “Demand collapse has superseded all geopolitical concerns,” he says and OPEC has so far been unable to cut production and stop the drop in a meaningful way. For January, Carbone says support is $40.53; resistance is $56.
Jeremy Ascher, president of Chartwhiz.com, points to a lack of bullish fundamentals and solid support at $40. “If that holds and OPEC cuts production, you might have buying come back in January,” with trade between $57 and $60.