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jennifer dowty

Today, the price of crude oil broke below a key technical support level, and is now trading below $50 (U.S.) a barrel. This follows a 5-per-cent slide in the commodity price on Wednesday. This swift sell-off is also of concern since $50 was a key psychological support level.

The sharp decline was fuelled by a much higher-than-expected oil inventory report released on Wednesday by the U.S. Energy Information Administration. Crude oil inventories rose by 8.2 million barrels over the past week, well above the Street's expectations for a build of just 1.5 million barrels.

The next technical support level investors will be watching is around $48.50, which is close to its 200-day moving average (at $48.69). Last November, as well as last summer, the commodity price fell below the 200-day moving average; however, the price weakness was short-lived with the price of oil rebounding sharply in the following weeks. If recent history repeats itself, the current price weakness may soon create a buying opportunity for long-term investors.

Year to date, the energy sector is the worst performing segment of the S&P/TSX composite index, falling 7.5 per cent, and eight stocks in the energy sector have posted price declines in excess of 20 per cent so far this year.

Some company insiders appear to be taking advantage of the share price weakness. For instance, in recent weeks, insiders at Suncor Energy Inc. (SU-T) and Precision Drilling (PD-T) have been accumulating shares. That being said, insider buying activity in energy stocks is still quite limited.