Natural Gas and Oil Forecast: Diesel Shortage Draws Washington In, Can WTI Break $101.38?

Oil Keeps Its Supply Premium as Diesel Shortage Draws Washington In

Crude oil fundamentals remain tight on Wednesday. Threats to Saudi Arabian infrastructure are increasing, US crude oil stocks continue to decline, and a diesel shortage is pushing up fuel prices.

Brent: Saudi and Shipping Risks Stay in Focus

Oil prices increased in Asian trade due to potential shipping risks in the Red Sea and threats to Saudi Arabian oil infrastructure, according to Reuters. The Houthi rebels claimed attacks on an Aramco site in Yanbu on Monday, as well as on the Shaybah oilfield and the Riyadh and Abha airports, though Saudi authorities did not immediately confirm the claims. The death toll from Monday’s Houthi attack on Yemeni government troops rose to 73.

Diplomacy offered little relief. Prices fell on Tuesday after the Iranian president discussed mediation efforts with Pakistan’s army chief, but the Iranian foreign minister said Tehran’s offer to mediate between Saudi Arabia and the Houthis went unanswered.

In the US, crude oil inventories continued to decline, and the already tight diesel fuel market worsened, sparking a response from Washington.

WTI: Inventories Draw as Diesel Stays Tight

The American Petroleum Institute (API) reported a drop of 4.93 million barrels in US crude oil stocks and 2.6 million barrels in distillates for the week ending October 16. The Strategic Petroleum Reserve (SPR) fell by another 300,000 barrels and now stands at 282.7 million.

According to a Reuters poll, crude oil inventories are expected to have declined by about 800,000 barrels for the week. Officials from the Department of Energy stated they were helping coordinate efforts with global refiners to increase output, as a diesel shortage has pushed up prices.

Natural Gas: Warm Outlook Overrides Lean Output

US natural gas prices fell to a more-than-two-week low on Tuesday, as forecasts calling for warmer-than-normal temperatures through early November were negative for prices. Total demand, including exports, is expected to increase from the current 106 bcf/day to 110 bcf/day next week, still below the five-year average of 117 bcf/day.

So far in October, production has averaged 111.4 bcf/day and LNG feedgas has averaged 18.2 bcf/day. Overseas, competition for winter supplies pushed Europe’s benchmark gas price above €90 per megawatt-hour for the first time since December 2022.

WTI Technical Analysis: USOIL Holds $97.47 as $101.38 Comes Into Focus

WTI crude is currently trading at $99.15 according to the 2-hour chart. Something interesting to look at is how firmly the $97.47 to $98.00 zone has shifted from resistance to support. This zone capped the upside in mid-September. Alongside this, WTI crude has also been in an uptrend since the lows of early October, as well as an uptrend along a rising trendline which WTI crude tested at $95.31 earlier this week before being swiftly bought. The 50-period SMA also crossed above the 200-period SMA in mid-October and is also currently sloping up.

The first major area of resistance currently comes in at $101.38, where the latest upswing was capped. The next major area of resistance comes in at $104.40, followed by the September high of $106.78. The first major support area comes in at $97.47, with the 50-period SMA, followed by the rising trendline from the lows of early October near $95.75. Below that, $93.54 is the next support.

Momentum, as shown by the RSI at 56, is in a neutral position. I am currently leaning bullish while WTI trades above $97.47. I think a clear break below $95.31 would invalidate the uptrend and turn control back to the bears. Conversely, I think a clear break above $101.38 would confirm the breakout and extend the uptrend toward $104.40 and $106.78.

Brent Technical Analysis: UKOIL Holds $108.21 as $112.00 Comes Into Focus

Brent is trading near $110.31 on the 4-hour chart. What is capturing my attention is the beautifully defined rising channel that started in early October, with prices making higher highs and higher lows. Brent broke above the September high near $110 and continues to grind higher. Earlier in the week, prices dipped to the lower channel line, near the faster moving average, and were bought, and dips continue to attract buyers.

First resistance is near $112.00. If prices trade above that, I’d expect prices to head toward $113.96 and $115.76. On the downside, $108.21 is the first support level, followed by the rising channel and $105.94. Below that, prices could test $103.41.

RSI is near 59 and sits just under the signal line at 60. This suggests upward momentum is positive but has cooled after the recent rejection at $112.00. I remain bullish as long as Brent trades above $108.21. A move above $112.00 would further reinforce the bullish case. A move below $105.94 would confirm a break of channel support and suggest a deeper correction.

Natural Gas Technical Analysis: NG Breaks Below $3.02 as $2.91 Support Comes Into Focus

Natural gas is trading near $2.96/MMBtu on the 2-hour chart. What is noticeable is the clean break below the rising trendline that had been supporting the price since the September lows. The $3.00 to $3.02 support zone lost its buying interest, and the recent bounce was rejected near $3.00. Since the mid-October highs, natural gas has been making lower highs. The faster moving average is bearishly crossing below the slower moving average.

The first support that I see is at $2.91, the early October low. A breakdown below that would bring $2.86 into play and then $2.79, the September swing low. On the upside, the $3.02 resistance is in play, and above that are $3.09 and $3.18.

RSI is at 34, in bearish territory and curving down with its signal line, showing that bearish momentum is in place but approaching oversold territory. Because of this, I think a small bounce cannot be ruled out. Natural gas is bearish while below $3.02. A close below $2.91 strengthens the bear case, while a close above $3.09 invalidates it.