Crude Oil Price May Drop by $6 per Barrel, Within Two Months

August 12, 2009 – A drop in oil prices in the next two months is predicted by a decline in demand for crude oil among countries in the Organization for Economic Cooperation and Development, technical analysis techniques, and the time cycle analysis used by Blue Apple Trends.

The International Energy Agency said in its August Oil Market Report that crude oil demand within the OECD countries in 2010 will likely be 45.1 million barrels per day, which is 25,000 barrels per day lower than the IEA previously announced. Overall crude oil demand in the world is expected to increase in 2010 because of strong economic growth in Asia, reported the Oil & Gas Monitor.

Crude oil for September delivery fell $1.15, or 1.6 percent, to settle at $69.45 a barrel yesterday on the New York Mercantile Exchange. It was the fourth straight day of declines and the first time crude settled below $70 this month, said Bloomberg News.

Oil for October delivery has fallen past key resistance at $70 a barrel, and the next significant support is $68.25 to $67.80, reported Bloomberg, citing a technical report. The crude market is $6 over the trend line, the report said.

“A slide of $6 per barrel from the current price is reasonable, because history repeats itself,” said Allen Reminick, president of Blue Apple Trends LLC and writer of The Reminick Letter. “Crude oil is repeating a pattern from the early 1980s that indicates a price drop is likely for a few months. After the decline, the market should see prices higher than they have been so far this year, into early 2010.”

Time cycles are mathematical rhythms of market behavior, said Reminick. Identifying the cycles helps to locate time points for repeated highs and lows. Once the patterns in historical data are located, they can repeat for up to nine to 12 months on a daily chart basis, he said.

Trendsetter 2, the intermediate-term forecasting model for Blue Apple Trends, points to a decline in crude oil, as well as in the U.S. equities and gold markets, said Reminick

“U.S. stocks, gold, and crude markets have been highly correlated in the recent four months, and are all looking very toppy,” said Reminick. “We expect about a two-month correction in all three markets into October.”

Today, U.S. crude gained $1.28 to trade at $70.73 a barrel by 12:10 p.m. EDT (1610 GMT). London Brent crude rose 95 cents to $73.41 a barrel, reported Reuters.

--Laure Edwards