Oil Gets Smacked Again, Could it be Heading Back to the $30s?

short-oil-etfOil prices continued their near seven-week-long pullback on Monday morning, hitting fresh three-month lows. Could black gold be headed back into the $30s?

The price of crude oil, as measured by the WTI, traded down to $43.81 per barrel in early trading on Monday, pressured by a stronger dollar and higher oil production and rig couls despite high reserve levels.

The United States Oil Fund LP ETF (NYSE:USO) fell $0.12 (-1.15%) to $10.30 per share in premarket trading Monday. The USO, which is the most popular way for investors to play the price of crude oil, is now more than 37% off its 52-week high set in late July of last year.

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Further to Fall?

The question naturally becomes how much further can crude fall? From a technical standpoint, USO has some technical support just about the $9 level. If production and inventories stay high, however, and the dollar stays strong, the bottom could actually be much lower.

Oil’s recent sell-off has been very steady, and WTI very well could be headed back into the $30s. A re-test of WTI’s multi-year low of $32.85 seems unlikely, but the short-term and long-term trends are both very bearish.

Investors are better off respecting such a strong trend right now, rather than fighting it.