Crude oil prices have dropped to an eight-month low beneath $80, and that trend will only accelerate, says Jeff Kennedy, chief commodity analyst at Elliott Wave International.
Oil may return to the November 2001 low of $16.70, which would represent a 79 percent drop from current levels, he tells Yahoo.
Kennedy utilizes technical analysis, which is based on chart formations, as the foundation of his forecasts. “Elliott Wave principles are based on pattern recognition and crowd psychology,” he says.
“The price chart has a story to tell. As a technician, I listen to the story. The story right now in the crude oil price charts argues for a further decline well into 2013 and a compelling case below $30.”
A strengthening dollar also will weigh on oil prices, Kennedy says. Oil and the dollar often move in opposite directions because oil is priced in dollars globally.
“The dollar is just getting started” in its rally, he says. “There are serious problems in Europe, serious questions with the longevity, even the existence, of the euro.”
Kennedy expects the euro to plummet 50 percent against the greenback.
Plenty of oil market participants share Kennedy’s bearishness on the commodity.
“There is no catalyst here to spike the price,” Rich Ilczyszyn, founder of iitrader.com, tells Bloomberg. “We know that demand is still going to be relatively weak, and we know that we have plenty of supply.”
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