On Monday, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, declined 5.9% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, decreased 5.7%. Both exchange traded products slumped to all-time lows Organization of Petroleum Exporting Countries decided against curbing production to prop up prices.
Crude oil prices fell to their lowest levels since early 2009 after OPEC’s meeting Friday ended without an agreement to lower production, Reuters reports. OPEC has been fueling a global supply glut in an attempt to maintain market share and squeeze out high-cost oil producers, such as the nascent shale industry in the U.S.
OPEC has kept up production to pressure high-cost rivals, such as the developing U.S. shale oil producers. The International Energy Agency expects it will take several years before OPEC can effectively price out high-cost producers. [Oil ETFs Face World-Record Supply Glut]
Now, some technical analysts are identifying $35 per barrel as a key support area for crude futures going forward.
“Crude bottomed in January 2009 at $33.20 but spent the better part of December 2008 to March 2009 in a range between $35 and $50. I would assign the bottom of that range as support now, too, but would not suggest buying the instant the market got there. There is too much emotion built in the energy markets from industry losses and other fundamentals that have lead to predictions oil prices will stay low for years,” reports Michael Kahn for Barron’s.