Natural Gas and Oil Forecast: Hormuz Crisis Sends Oil to $107 – Is $115 the Next Stop?

Geopolitical Disruptions Still Ruling The Day in the Strait of Hormuz Crisis

The still ongoing Strait of Hormuz crisis is still causing a lot of problems, with 20% of the world’s oil supply grinding to a near complete halt due to the effective closure. This has triggered what is undoubtedly the biggest oil shock the world has seen so far, with the Middle East’s oil production basically shutting down in April at 9.1 million barrels per day and the combined losses over the first two months of the conflict already exceeding 850 million barrels. Meanwhile, oil stocks outside of the Gulf region were seen to be dwindling sharply in March.

The US saw its commercial oil stocks drop by a whopping 6.2 million barrels in the week leading up to April 24, bringing the total to 459.5 million barrels – that’s almost exactly 1% above the five year average. In this period we also saw refinery inputs increase while imports into the country actually dropped. Another source of uncertainty has been the UAE’s decision to leave OPEC, but let’s be honest the real issue here is the total lack of oil flowing out of the Strait of Hormuz.

The good news is that oil storage in the US is still looking pretty healthy at this time of year. The EIA reported a 103 Bcf inflow for the week that ended April 17 which lifted the total to 2,063 Bcf, which is a cool 142 Bcf higher than last year and 137 Bcf above the five year average. Mild weather is supporting the continued injection of gas into storage and as you’d expect with that is that record levels of production are being maintained – and don’t forget the US is still a major exporter of LNG so that is supporting demand as well.

The upshot of all of this is that oil fundamentals are looking pretty bad due to the strain on oil production and natural gas is sitting pretty with a big enough inventory cushion to get it through the summer without too much trouble.

Natural Gas Price Forecast – Natural Gas hits new Lows, Bears eye $2.46 and the Bears are Gaining Ground

Natural Gas is trading at $2.632 and still sinking inside a really well defined bearish channel that’s been in place since late March. That last move through the $2.664 support level has been enough to see price testing the $2.50 demand zone.

The red moving average has just crossed over the actual price action and thats usually a bearish sign – the trend has got momentum on its side. The RSI is still really low, down around the 30-40 range, which just shows that the selling presure is still pretty strong.

If price breaks down below $2.568 then its hello $2.46 and $2.36 in the next flash of bad news. On the other hand, a big break above the channels upper boundary at $2.806 would be a real shock and would probably send the price shooting upwards – but thats a bit of a stretch at the moment.

WTI Crude Oil Price Analysis – The Uptrend Remains Strong but RSI says to Expect a Pullback

WTI crude is sitting at $107.27, and continuing to build on its recovery from that April low that was around $83 – a pretty tough spot. Its all good news though, price is still firmly inside that rising channel – the short term and long term averages are both trending upwards and looking pretty healthy.

This recovery from the $92 support level has been really strong – broken above the $100 and $106 resistance levels with real momentum behind it. But, the RSI is starting to get a bit scary – it’s heading for overbought territory just shy of 80, which is a clear warning sign that it may be due to take a breather or even pull back. Right now, the first levels of support are around $102.79-$100 and then there’s the upper boundary of the channel at $113.81 which is going to be key resistance.

Its going to take a close below $100 to change the structure and get the bears back in the game.

Brent Crude Oil Technical Analysis – Next Stop $115.20 After Clearing that Trendline

Brent Crude is trading at $110.68 and what a move it has been – from that April 17 low of $88 its been a real fight for the bulls and a brilliant recovery. Price broke above the trendline and since then it just kept pushing up – currently testing the $112 level which is a real solid setup.

The two moving averages are both trending higher and the 200-period average has put in a real solid show of support around $97.78. The RSI has really gone on a tear and is now deep into overbought territory above 75 – that tells me the price has got a bit of a stretch going on in the short term. So, if things do start to pull back, the first real levels of support are going to be $107.61, and then a bit lower at $103.39.

And if its a big one – a close above $112 and the next stop is $115.20 and beyond that the $119.30s.