BANK OF AMERICA: 'Oil is in a downtrend and risks trending into the $30's'

pulse

June 20, 2017 8:19 PM

Oil is headed even lower and could revisit levels it hasn't hit in over a year, a technical strategist said.

Saudi Arabia's energy minister Khalid al-Falih adjusts his glasses during a news conference after a meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Austria, December 10, 2016.

Oil prices fell to seven-month lows on Tuesday, as traders continued to grapple with a market that is oversupplied.

According to Paul Ciana, a technical strategist at Bank of America Merrill Lynch, oil is headed even lower and could revisit levels it hasn't hit in over a year.

"Oil is in a downtrend and risks trending into the $30's," Ciana said in a note on Tuesday. West Texas Intermediate crude oil, the US benchmark, fell to a 12-year low of $26.21 per barrel last February.

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.

Ciana noted a year-to-date downtrend in the price action of oil. It peaked this year near $54 per barrel in February and has lost nearly 20% this year.

The front-month contract for West Texas Intermediate crude-oil futures on Tuesday fell to as low as $43.16 per barrel, down nearly 3%.

The Organization of Petroleum Exporting Countries, a cartel of key producers, has had a tough time rebalancing the oversupplied market. After agreeing to curb production for six months starting in January, OPEC decided in May to extend cuts for nine more months.

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