Crude May Decline as Prices End Below $90: Technical Analysis

Oil may drop below $80 a barrel after settling below $90 for a second day, according to a technical analysis by Bill Baruch, senior market strategist at Iitrader.com in Chicago.

Failing to break above $90, near the November contract’s 100-day moving average of $90.60, may send futures to the July 25 intraday low of $87.50 and trigger a further decline, Baruch said. After closing below the 100-day moving average at $99.68 on May 4, the November contract fell to $78.73 on June 28, the intraday low for the year.

“The continued close below $90 will encourage selling,” Baruch said. “It’s going to get ugly if we break that $87.50 level. We could go all the way down to this year’s low near $78.”

Oil for November delivery slid 55 cents, or 0.6 percent, to settle at $89.33 a barrel yesterday on the New York Mercantile Exchange. It was the third close below $90 in four days.

Prices may rebound if they stay above $87.50 this week, Baruch said. The November contract expires on Oct. 24.

To contact the reporter on this story: Moming Zhou in New York at Mzhou29@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net