Natural Gas and Oil Forecast: Oil Plummets 19% on Ceasefire – Will WTI Hold $94.00?

Market Overview

Oil and Gas Reset as Ceasefire Eases Supply Fears

Oil and natural gas traded back down to earth after a wild rollercoaster ride on the back of easing Middle East tensions. The crude oil price had blasted up to near $118 on fears of supply disruptions through the Strait of Hormuz, but then plummeted as much as 15 – 19 percent – before stabilizing around the $96 to $98 mark. The sea strait is critical, accounting for nearly 20% of global oil trade – and any disruption to supply can send the price skyrocketing.

Natural gas was dragged down by around 5% to $2.72 per MMBtu, hit by weak demand expectations and the fact that US supplies are plentiful.

Analysts are saying that while the ceasefire reduces the immediate risk of supply problems, there’s still lots of uncertainty and not yet enough certainty about compliance to let up on the volatility in the energy market just yet.

Natural Gas Breaks Support, Bearish Structure Dominates

Natural gas is still stuck in a descending channel and took another tumble after breaking below the key support at $2.77. This led to the formation of consecutive lower highs and lower lows – which is exactly what you want to see if you’re bearish. The recent candles show that any attempts to go back up are pretty weak, which is a sign of a total lack of strong demand in the market right now.

The fact that the price is below both the 50 and 200 day Simple Moving Averages confirms that the trend is bearish. And the RSI hovers near 40, which is a sign that the price is still under downward pressure with no signs of a reversal in sight. The Fibonacci levels suggest that we’re likely to see a further decline to $2.65 unless the price can get back above $2.77. And there’s a strong trendline acting as a major barrier to any recovery.

Trade Idea: Sell below $2.77 with a target of $2.65 and stop loss above $2.85

WTI Oil Rebounds From Trendline, Eyes $100 Retest

WTI had a pretty wild day, making a sharp bearish plunge down to near $111.80 before breaking below the 50 day Simple Moving Average and testing the trendline support at $91.00. Since then it’s just been a case of small-bodied candles going back and forth, telling us the price is still making up its mind whether to keep going up or down, and whether this particular trendline will hold.

The trendline itself still looks like a higher low within a bullish channel that’s been forming across the board. The RSI had a bit of a dip near 30 and is now starting to recover, which is a good sign that the bearish momentum is starting to fade.

Looking at the Fibonacci retracement from the recent high, we can see that price has held up pretty well above the 0.618 zone near $94.00. If it can get above $100.00 then it’ll be off and running again, with a target of $105.00.

Trade Idea: Buy above $100.00 with a target of $105.00 and stop loss below $94.00.

Brent Crude Stabilizes Above $91, Channel Structure Intact

Brent oil had a similar day to WTI – dropping sharply from $111.78 and breaking below short term support but still holding up above the trendline near $91.50. The recent candles show that there’s quite a bit of buying going on at the lower levels, and the price is starting to try and get back above the 50 day Simple Moving Average. The 200 day SMA is still in good shape, supporting the overall uptrend.

This all looks like a pullback within a healthy rising channel. And the RSI had a bit of a bounce from oversold levels, which is a good sign for further upside in the coming days. There’s a key bit of resistance near $100.00 – which is in line with a bit of consolidation over the past bit. If it can break above that then it opens the way to $102.90.

Trade Idea: Buy near $95.00 with a target of $102.90 and stop loss below $91.50.