Where is the Price of Crude Oil After This?
At the time of writing, the price of light sweet crude was traded at around $ 39 / barrel, after briefly dropping to an area of $ 36 / barrel two days ago.
When the price of oil was still in the range of $ 30.70 / barrel, we published an article entitled “Could the World Oil Fall to the Price of $ 20 / Barrel?” On January 13, 2016. In essence, in the article we explained that there is a possibility that oil prices will experience rebound because the average cost of world crude oil production at that time was in the range of $ 27 / barrel. In addition, technical analysis is also presented which states that long-term technical support is in the range of $ 33.20 / barrel (the lowest price in 2009) to $ 16.79 / barrel (the lowest price in 2001).
Speaking of technical analysis, the support area is a good area to look for a buy signal, because in the technical analysis the support area means that the area that is expected to be able to withstand the decline in prices and most likely will be followed by a rebound.
In the technical analysis in the article, we expressed the opinion that the potential for a rebound in world oil prices in 2016 was up to the range of $ 38-40 per barrel. Even if the oil price turns out to break above $ 40 / barrel, then the next strengthening target is the range of $ 50-60 / barrel.
About a month later, we are still related to the movement of crude oil prices, we publish another article entitled “Special Coverage: World Oil Prices Chance to Increase in 2016?” On February 16, 2016. In the article we explain that there is a potential rebound in crude oil prices based on the fundamental data we have collected, including quoting statements from several prominent global oil companies such as Robert Warren “Bob” Dudley (boss BP) and Patrick Pouyanné (CEO Total).
Although world oil inventories at that time were still experiencing oversupply , in reality the speculators explicitly showed that they were prepared to face a rebound in oil prices, as seen from the number of long positions (buying) for WTI oil contracts.
Then on February 23, 2016, we updated the technical analysis for crude oil price movements in an article entitled “Knowing the Things About Crude Oil Before Trading” . Technically, at that time we said that even though oil prices were still in a downtrend, for the medium term crude oil prices had the potential to strengthen to around $ 38.35 / barrel if they were able to break above $ 34.80 / barrel.
How about now?
Currently (03/17/2016), light sweet crude oil prices move in the range of $ 39 / barrel, in line with estimates delivered about two months earlier.Of course this is good news for those of you who had the opportunity to open long positions on crude oil contracts when prices were still moving in the range of $ 30 / barrel.
The next question is: what is the next projection of crude oil prices ?Will it reach the target at $ 40 / barrel?
There is a reason why we mentioned the figure of $ 38-40 / barrel as a target of strengthening oil prices in 2016. Technically, the figure appears because it is indeed a medium-term resistance area, so we naturally target this area as a target of strengthening oil prices.
When the price of oil is already at $ 39 / barrel, then technically we can assume that the target has been reached because the number 39 is right in the middle between 38 and 40. Technically, for now it is not right if you insist on catching up with opening positions buy at the current price.This is because according to the technical analysis the resistance area is an area that is expected to be able to withstand the strengthening of prices and there is a possibility that prices will drop from there.
Technically, there is a possibility that oil prices will be corrected to the medium-term support area in the range of $ 34.26-31.12 / barrel.
For the medium-term outlook, the price of new crude oil will likely continue to strengthen if it breaks above $ 40 / barrel. The next possible target price movement is the range of $ 50-60 / barrel.
Then what can be done now?
For those of you who have a long position at a lower price, there are at least two choices you can do:
– Hold the buy position until the price reaches $ 40 / barrel.
– Close the buy position ( profit taking ) and wait for another opportunity to buy if there is a correction.
Every choice certainly has a risk. If you choose the first option, there is a possibility that the price will actually go down. While if it turns out the price continues to strengthen, then you will lose the chance to post a bigger profit if you choose the 2nd option.
However, indeed technically a buy position should be closed ( profit taking ) when the price has moved in the resistance area. But all that depends on your choice and of course you must be prepared with every possibility that can happen.
If you have not opened a buy position and want to open a buy position, you should wait for bullish signal confirmation when the oil price is corrected to the support area, or wait for the breakout confirmation as stated above.