Brent crude oil dropped to a level of $56.88 per bbl during the trading session on Thursday. The fall in oil prices was mostly linked to February's negative statistics for US retail sales that decreased by 0.6% despite forecasts.
Many oil suppliers have to cut investments against a backdrop of a general price decrease. Thus, the decrease of expenditures in the oil sector may amount to 1 trillion dollars, which will seriously damage the industry. The general decrease in oil prices is still due to US high production volumes and lowering demand on the part of China. OPEC is not taking any actions either. Low oil prices are driving out small oil producing companies from the market whereas large companies are trying to reduce costs by cutting capital spending or firing employees.
Thus, the price is not likely to rise above its February highest of $62.66/bbl in the nearest future and therefore short positions will be promising.
Support and resistance
The closest resistance level is a price 58.44 - yesterday's trading maximum.
This week's minimum at 55.79 serves as support level.
In the medium term, the price may have fallen to a level of 54.00 (February's lowest) by the end of the month, therefore short positions seem to be more promising. They should be opened at current price with a target at 54.00 and protective orders at 58.44.