Crude Oil Drops Below Key Levels While Natural Gas Surges on Winter Demand

Oil prices dropped on Tuesday despite disruption to U.S. production from a severe winter storm. The storm shut off as much as 2 million barrels per day, which is about 15% of total U.S. output. Traders had expected a price spike, but the market moved in the opposite direction. Brent crude oil dropped to $65.31 and WTI crude oil dropped to $60.39.

Refineries along the Gulf Coast were in trouble with the freezing conditions. These conditions could cause fuel supply disruptions. These uncertainties have pushed natural gas prices to break $5.50. However, the oil market was more concerned about general weakness in demand than about temporary supply reductions.

Moreover, the tensions in the Middle East also returned as U.S. aircraft carrier arrived in the region, furthering concerns about conflict with Iran. While these tensions typically support the oil market, the reaction is muted. Investors are waiting for more concrete developments before pricing in risk.

Crude Oil Technical Analysis

WTI crude oil prices remain under bearish pressure and consolidate below the 200-day SMA. The price is now consolidating for the next move. A break below $55 area will introduce further downside toward lower levels. However, a break above $62 will introduce further upside toward the $75 area. The overall picture for WTI crude oil prices remains bearish, and a break below $55 is required to take the prices further downside.

The 4-hour chart for WTI crude oil also shows strong consolidation between $59 and $62. As long as the price remains below the red-shaded area, it remains under strong bearish pressure. A break below $59 will introduce further downside toward $55. However, a break below $55 will introduce a strong drop in WTI crude oil. The RSI has also been consolidating since the last quarter of 2025, which indicates strong consolidation in the short term. However, a break of these levels will define the next move in WTI.

Natural Gas Technical Analysis

The daily chart for natural gas is bullish as prices are surging on strong demand in winter. The prices have surged above $7, which indicates market abnormality. While a surge in natural gas is likely to continue, any correction toward $5.50 will introduce another buying pressure.

The 4-hour chart for natural gas shows that the strong surge in natural gas from the $3 area has taken prices above $5.50. Therefore, the market is likely to continue higher as long as the price remains above $5.50.

US Dollar Index Technical Analysis

The daily chart for US Dollar Index shows that the index has shown strong bearish pressure after breaking below 200-day SMA. The 50-day SMA is crossing below the 200-day SMA, which indicates continued downside in the US Dollar Index. This downside pressure in USD is taking precious metals higher and also affecting the broader commodity sector. A break below 96.50 will take USD toward $90.

The 4-hour chart for the index shows that recent drop in USD is taking the index toward lower range of the consolidation zone at around $96. The breakout from 96 after the formation of a double top pattern at 100.50 signals strong bearish pressure for the USD Index. This bearish pressure will likely target the 90 level in the USD Index, which may introduce another surge in precious metals.

Final Thoughts

Oil prices are suffering as traders are more concerned with weak demand than temporary supply cuts. The serious winter storms and tensions in the Middle East did not push oil prices up. Moreover, the bearish technical setup in crude oil shows that a break below $55 will confirm further drop in oil prices. On the other hand, natural gas is likely to trade higher on strong demand from extreme winter season as long as the price remains above $5.50.

If you’d like to know more about how to trade natural gas, please visit our educational area.