Natural Gas and Oil Forecast: Middle East Risk Keeps Oil Near $90 – Breakout or Bust?

Market Overview

USOIL is still very much driven by uncertainty in the Middle East. President Trump has extended the US-Iran ceasefire indefinitely , but at the same time has kept the naval blockade up on Iranian ports. Iran however wont be returning to the negotiating table until the blockade is lifted so right now the status of the Strait of Hormuz is very much up in the air.

The ongoing risk of supply disruptions (because the strait handles around 20% of the worlds seaborne oil) and production shut ins means the market is still paying a risk premium, but a diplomatic breakthrough could ease things up very quickly. The good news is that US domestic production and inventory levels offer at least a bit of a buffer.

NG on the other hand is being driven more by its own domestic issues than oil geopolitics and is feeling the pinch from some weak fundamentals – pretty mild weather in April cut heating demand and let storage levels build up pretty strongly. Production declines have slowed right down and LNG export flows are at a near record level which helps a bit, but the overall supply and demand picture is still pretty weak especially since shoulder season demand is pretty subdued. But on the flipside longer term LNG export growth is at least a bit of a long term positive.

Natural Gas is Bouncing off $2.71: Rangebound for Now

Natural Gas is trading round $2.71, staying above that key support zone at $2.60 after a pretty long downtrend – so thats a good sign. But the 50 and 200 day EMAs are both still above the price, which is a pretty clear tell for a bearish bias at the moment.

That down sloping trendline is still capping the upside, and the past few candles have shown a bit of a rejection near $2.72–$2.75 – so dont get too excited just yet. RSI is starting to creep up towards 60, which could be a sign of some short term bullish pressure, but I wouldnt say the momentum has got enough follow through yet. A clean break above $2.75 could get the price running up to $2.87, whereas if it cant hold $2.60 then $2.50 is probably just around the corner.

USOIL Heading Back to $90: Don’t Count Out the Bear Yet

WTI crude is trading round $90.01, after bouncing up from that $84–$85 support zone where a lot of people have been buying in, but it’s still stuck within a downward sloping channel that’s not yet broken. Price is struggling to stay above that 50 day EMA which is sitting at $92.00 at the moment – and thats putting a ceiling on things, meaning bearish sentiment is still in control.

The past few candles have shown us higher lows, which always makes for a decent short term recovery, and RSI is slowly climbing its way back toward 50, which is telling us that momentum starting to pick up a bit. But, the price still can’t get past that key zone around $91.10–$92.00 and as long as that holds, sellers are likely to stay in the drivers seat. If it fails to break through there, you could see WTI get pushed right back down to $85.30 – whereas a clean break above $92.00 could get the party started and send prices running up to $95.30.

Brent Oil just Hanging at $99: Can it Break the Trendline?

Brent crude is hovering near $99.15, trying to make a comeback after bouncing off a good support zone at $92.50, but now its stuck trying to break through a down sloping trendline which looks like it could be a pretty strong resistance zone around $100.00. The 50 day EMA is also still acting as dynamic resistance – which means its not making it easy for Brent to really make a run for it.

The candlesticks look like there’s a bit of indecision going on here, with the bodies getting smaller – thats a pretty clear sign that people are just not sure which way to go yet. RSI is creeping up but still a way from getting into strong bullish territory. A clean break above $100.00 would be the key to unlocking a run up to $102.70, whereas a rejection would probably just send Brent right back down to $96.50.