Oil could slide further, but where's the bottom?

Crude headed to $70?
Crude headed to $70?   

Crude oil continued to flirt with the key $80 per barrel level Friday, signaling another possible sharp leg down in price in the coming weeks.

West Texas Intermediate crude fell to an intraday low of $80.36 before inching back up to $81. Oil has slid below the $80 mark recently but has not breached it for long. Oil was weak Friday despite a stronger equity market and weaker dollar, both factors that have lifted crude prices lately.

News that Iraq oil exports are holding close to a record and Kurdish shipments are rising despite unrest in Iraq adds to the view the world market is well-supplied and could continue to be, a negative for prices.

An operator works near a tanker docked at a floating platform offshore the southern Iraqi port city of Al Faw.
Haidar Mohammed Ali | AFP | Getty Images
An operator works near a tanker docked at a floating platform offshore the southern Iraqi port city of Al Faw.

"What you're going to see is the market really trade lower and press the issue of price on OPEC ahead of their meeting at Thanksgiving," said John Kilduff of Again Capital.

Kilduff said while Saudi Arabia has said it would cut prices to preserve market share, a report earlier from Reuters added confusion in the market because it said Saudi Arabia reduced exports slightly in September despite higher production.

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Oil has been hit by the double whammy of strong supply and weakening demand growth. In addition to a more than 7 million barrel build in U.S. crude stocks last week, demand for products like gasoline, heating oil, and distillates are also falling, which impacts the price of crude used to make those products.

"I think products are dragging down the crude price," said Jeff Grossman of BRG Brokerage. "When demand for products drop, it takes crude down right along with it."

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Traders have been grappling for weeks with the question of whether or not the bottom is in for crude.

"I thought we had bottomed—honestly I thought crude would be trading around the $83 level right now," Grossman said. "But remember, if we close under $80, we're definitely going lower...maybe $75."

Some traders also pointed to reports of the latest case of Ebola in New York City as a reason behind Friday's price action. They said there's concern oil demand could weaken even further if consumers cut back on travel for fear of Ebola, or pare back spending, hurting global growth.

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"Ebola's one reason we're moving lower again," said Anthony Grisanti of GRZ Energy. "But also a relatively strong dollar and a supply glut adding to nervousness in the market."

In addition to market chatter, a fresh report from the Energy Information Administration (EIA) Friday morning saying domestic oil prices will not rise if the U.S. lifts the ban on oil exports adding some pressure.

"I don't actually agree with the EIA," Grisanti said. "If we flood the market with cheaper product, people will go for the discounted crude instead of Brent and it will drive prices up."

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