By Grant Smith
Jan. 21 (Bloomberg) -- Crude oil may plunge toward $70 a barrel after failing to break resistance around $84 last week, according to technical analysts at Commerzbank AG.
Oil futures in New York have lost almost 7 percent since reaching a one-year high of $83.95 a barrel on Jan. 11. Prices have peaked in the short-term and will extend their slide until reaching a trend line linking price lows in 2009, according to analysts at Commerzbank, last year’s third most-accurate oil forecaster in a survey by Bloomberg.
“Last week the market charted a key week reversal from the $83.95 level,” Commerzbank’s London-based technical analyst Karen Jones said in a report. “This does imply that short-term at least, the market has charted an interim top, and we would allow for losses back toward the channel support at $70.92.”
Last year’s minimum support line connects weekly price lows such as $58.32 a barrel on July 17 and $68.59 on Dec. 18.
“Longer term, providing the channel holds, the outlook remains bullish,” Commerzbank’s Jones said.
Prices may then rise toward a resistance level between $85.82 and $86.24 a barrel, defined by oil’s low points in December 2007 and February 2008, she added.
This threshold is “a significant hurdle and we would not be surprised to see oil stall here for a while,” Jones said.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
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