Both Brent and WTI are at twelve-year low of slightly over $30 per barrel. Brent dropped 6% yesterday, while WTI declined 5%. Today the prices have registered a drop of over 2%. Oil prices are expected to continue with the downward trend based on the technical scenario, market sentiment and present momentum.

In the week to 5 January, net long positions were increased by financial investors in Brent by 20,000 to 187,700 contracts contrary to WTI. The drop in the prices by almost 20% must have compelled the investors to unravel these positions in order to constrict any more loss. However, this is likely to pressurise the oil prices further.

The US Energy Information Administration said that in February shale oil output in the US is expected to drop to 4.8 million barrels per day, declining by 116,000.  If this happens, the oil production in the US will have fallen for the seventh continuous month. Shale oil production in the country will then have declined by 638,000 barrels per day from its March 2015 high.

However, the increasing in oil output in Alaska and the Gulf of Mexico indicates that crude oil production in the US has declined by a considerably lesser amount. In the following months, shale oil output is expected to increase due to the fall in drilling activity, lower price level and the current slide in prices.

"We therefore still expect to see prices recover during the course of the year", says Commerzbank.