Oil Investors And Traders Are Eyeing The $40.76 Level: Here's Why

Oil prices are trading near the $42 per barrel mark and have been in a downward trend the past few weeks.

According to Bloomberg's Liam Denning, the only number that matters right now is $40.76 — the 200-day moving average of the price of one barrel of oil.

Oil prices have already traded below its 50-day moving average and 100-day moving average, which typically attracts buyers to the market. Given the fact that the 200-day moving average is approximately $1.25 away from its current price the commodity may find support or could take a "sharp dive."

Related Link: What's Driving Oil's Ongoing Weakness?

"After all, the last time all three moving averages were taken out in short order was back at the start of the crash," Denning pointed out.

Denning acknowledged that there is no "real reason" why the 200-day moving average has any more importance than another arbitrary number. However, he suggested that investors seem to be placing emphasis on the Dow hitting a round number, so "it is what it is" and "people take their cues from all sort of things."

Finally, Denning suggested that oil speculators are "nervous," while refiners are "struggling with lackluster margins." When coupled together, the oil market could be "heading for a late-summer slide."

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