Crude Oil Spread Betting Market at Key Support Levels

A look at the Crude Oil Spread Betting Market from Michael Hewson, Market Analyst, CMC Markets.

The failure to break above the April highs of $87.10 in May prompted a sell-off below the $80 mark.

Fears of a slow down in economic growth, due to the sovereign debt crisis unfolding in Europe, and a possible tightening of monetary policy in China have seen a steady decline in the oil price over the last two weeks, after making a double top at $87.10.

The stronger Dollar has also helped push oil lower as commodity indices in general have pushed away from their recent highs as declining risk appetite has weighed.

Crude inventories have also risen to record highs which have also had a dilutive effect on the oil price.

The black gold now has a key support area around the February lows at $69.50 which has pretty much held for the last 6 months apart from a brief spike to $68.60 in mid December.

Another technical factor prompting the move lower has been the break below the 200 day moving average for the first time since May 2009 after the Crude price had bounced away from its December 2008 lows at $32.40.

While not in itself conclusive of a change in direction, the fact that oil has broken so conclusively below its long term average is of some concern.

A break below the support level around $69 could well open up a deeper correction towards the $66 area which would equate to a 38.2% retracement of the up move from the lows at $32.40 to the peaks around $87.

There is also significant support around the $65.00 area which was the August and September 2009 lows.

The crude oil spreads need to recover back above the $74.60 resistance area to alleviate the downside pressure.

Announcements from the Eurozone and China will be closely monitored over the coming days and weeks in order to gauge future demand requirements.

Spread betting, CFDs and FX are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary.

The above content does not constitute investment advice. Neither CMC Markets nor Online-Spread-Betting.com accepts any responsibility for any use that may be made of the above.

Article approved by CMC Markets. CMC Markets is authorised and regulated in the UK by the Financial Services Authority, registration no. 173730.

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Note - Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.

'Crude Oil Spread Betting Market at Key Support Levels', Feature by D. Jones, last update: 21-May-10

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