Why oil prices could go even lower-Lawrence Lewitinn

Stronger-than-expected economic data may cause some investors to take a more positive stance on oil. But even though crude has recently experienced a few positive sessions, crude’s collapse isn’t necessarily over just yet.
The U.S. Commerce Department bumped up annualized third-quarter growth numbers to 5.0 percent from a previously reported 3.9 percent. That revision led traders to buy oil contracts soon after, on the expectation that a roaring economy will mean more demand for energy to keep engines humming. Though crude oil dropped soon after, the commodity finished Tuesday’s session with a 3 percent gain.
Still, while America’s economy may be ticking up, the same cannot be said for much of the world. And on the supply side of the equation, Saudi Arabia continues to pump out oil in an effort to maintain market share despite rising North American shale oil production.
“Globally, the expectation is that demand is falling, and that demand will continue to fall,” said Gina Sanchez of Chantico Global. “And we still see enormous amounts of supply continuing to come on. As long as you have that situation, it’s going to be really, really tough to sustain a balance in oil.”
Saudi Arabia will continue its policy for the foreseeable future, maintains Sanchez. And as a result, oil “is going to be weak for a while,” she predicted.

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The technicals are pointing to a “relief rally” in oil, according to Craig Johnson, senior technical research strategist at Piper Jaffray. However, he doesn’t see such a rally lasting long. Johnson’s chart of crude shows that after breaking below a four-year consolidation range, oil is now coming up to what he sees as an area of support between $55 and $58 per barrel.
“That’s a good spot where you can find a bit of a relief rally,” said Johnson, who is also the president of the Market Technicians Association. “After that, you’ve got support at about $45 to $55 as a big zone of support.”
If the massive U.S. dollar rally pauses, Johnson expects oil prices to get an extra bounce off its support levels. A stronger dollar tends to bring down the price of oil.
Yet Johnson anticipates that any such bounce will only be temporary. “If you look forward over the next year for oil, it’s going to be lower.”

Culled from CNBC in yahoo Finance