Crude oil has gotten crushed this week, with West Texas Indermediate futures falling below $90 per barrel on Thursday for the first time in more than a year. And though oil has staged a mild comeback over the course of the session, crude oil futures are still 15 percent below the high set in June.
At this point, traders say bearish fundamentals and an awful-looking chart could point to more downside ahead for oil.
The main cause for the crude decline comes out of the Middle East, where Saudi Arabia surprised the market by opting not to cut production even in the face of declining prices. And according to trader Brian Stutland, "the Saudis are just starting to feel the heat. U.S. production has really put some pressure on them."
Yet even as supply will be higher than expected, Stutland noted on Thursday's "Futures Now" that the European economy continues to be in major trouble "which is weakening demand global, so it's not just a supply thing—it's a demand thing overseas."
Jim Iuorio says the chart doesn't make things look much better. He notes that oil has fallen below a key level of support around $91, which could lead to further selling.
"From a technical standpoint, I think it's broken some levels and some damage has been done to the chart. If we start to see some weakness again and the November contract trades $90.30," Iuorio would want to get short.
The broader view for crude looks bearish as well. Fadel Gheit of Oppenheimer points out that since technology has reduced production costs into the $60s per barrel, oil prices are now more at home in the $80s than at $100.
To capitalize on a further drop in crude, Iuorio recommends selling November crude oil futures at the aforementioned $90.30 price, with a target of $87.70.