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Bank of America: Oil Price Could Tumble Into $30 Range

Image: Bank of America: Oil Price Could Tumble Into $30 Range
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By    |   Wednesday, 21 Jun 2017 07:38 AM

Experts reportedly are warning that oil prices might continue to tumble and could revisit lows hit more than a year ago.

"Oil is in a downtrend and risks trending into the $30s," Paul Ciana, a technical strategist at Bank of America Merrill Lynch, said in a note on Tuesday.

Using technical analysis, “traders examine chart patterns to forecast changes in a security. Some traders do this alongside fundamental analysis, which, in oil's case, would point to rising output from Libya and other key producers when making a bearish case,” Business Insider reported.

Oil peaked this year near $54 per barrel in February and has lost nearly 20% this year, BI reported.

"The decline in oil prices has paused at the bottom of the downward sloping channel with support at $44.09 and resistance at $46.75 and $48.70," Ciana said.

To be sure, oil fell to seven-month lows on Wednesday, set for its largest price slide in the first half of any year for the past two decades, as investors discounted evidence of strong compliance by OPEC and non-OPEC producers with a deal to cut global output, Reuters reported.

August Brent crude futures were down 12 cents at $45.85 a barrel by 0838 GMT, after falling nearly 2 percent in the previous session to their lowest settlement since November.

U.S. crude futures for August were down 7 cents at $43.44, having hit their lowest since September on Tuesday.

So far this year, oil has lost 20 percent in value, its worst performance for the first six months of the year since 1997.

Compliance with an agreement by the Organization of the Petroleum Exporting Countries and other producers to cut output by 1.8 million barrels per day from January reached its highest in May since the curbs were agreed last year.

"The slide in oil prices seems to be unstoppable," said Julius Baer commodities research analyst Carsten Menke.

"The supply deal’s effectiveness increasingly questioned, we believe that downside risks to oil prices from a (disorderly) and early unwinding have risen ... we still see prices trading sideways, spending more time in the high 40s than the low 50s as growing shale output and stagnant western-world oil demand undermine the Middle East's restriction efforts."

Data from the American Petroleum Institute on Tuesday showed U.S. crude stockpiles last week had dropped more than forecast. Gasoline and distillate inventories rose.

OPEC and non-OPEC oil producers' compliance with the output deal reached 106 percent in May, a source familiar with the matter said on Tuesday.

OPEC compliance with the curbs was 108 percent, while non-OPEC compliance was 100 percent, the source said. Another source confirmed compliance by all producers in May was 106 percent.

While compliance is high, it is what went on before the production cut that counts, BMI Research said in a note.

"A number of producers - notably Iraq, Saudi Arabia and Russia - aggressively ramped up output in the run-up to the deal, fast-tracking projects, expanding drilling programs and deploying spare capacity," BMI said.

Meanwhile, veteran financial guru Larry Kudlow, who served as the Donald Trump campaign's senior economic adviser, recently told Newsmax TV that the OPEC cartel's glory days have passed.

“I don't care what they (OPEC) do," Kudlow told Steve Malzberg on "America Talks Live." "Our oil and fracking or natural gas makes the United States the most important oil producer and if the price goes up, you'll see all that fracking come back online, supply will increase, the prices will be relatively stable,” he said.

“I don't care about OPEC," Kudlow, a Newsmax Finance Insider and CNBC senior contributor, said, calling the Organization of the Petroleum Exporting Countries oil cartel "yesterday's news."

“I say the swing producer is the United States. OPEC is dead,” said Kudlow — host of "The Larry Kudlow Show" and author of "JFK and the Reagan Revolution: A Secret History of American Prosperity," written with Brian Domitrovic and published by Portfolio.

(Newsmax wire services contributed to this report).

© 2017 Newsmax Finance. All rights reserved.

   
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Experts reportedly are warning that oil prices might continue to tumble and could revisit lows hit more than a year ago.
oil, price, crude, opec
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2017-38-21
Wednesday, 21 Jun 2017 07:38 AM
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