Natural Gas and Oil Forecast: Saudi Pipeline Shutdown Deepens Global Supply Risk

USOIL, UKOil & Natural Gas Outlook: Saudi Pipeline Shutdown Deepens Supply Crisis as Hormuz Risks Escalate

Oil fundamentals sharply tightened Monday following the closure of Saudi Arabia’s East-West pipeline as a result of drone attacks. The pipeline carries about 4 million barrels a day to the Red Sea port of Yanbu, representing about 4% of global supply. Industry sources told Reuters that inventories would sustain Yanbu exports for only 5 to 7 days if the pipeline remained closed.

The closure of the East-West pipeline will have a much more powerful effect on WTI and Brent as Saudi production has fallen so much. Saudi Arabia informed OPEC that production fell to 6.2 million barrels a day in August from 10.9 million in February, and the International Energy Agency also confirmed constraints on global supply of oil at 5.7 million barrels a day in 2020.

Hormuz remains another big problem. Ship-tracking data showed that just four commodity vessels left the Gulf and 10 entered, while daily traffic fell to the levels much below the recent average. A vessel is also reported to have been struck by an unidentified projectile while traveling through the strait. Before the war, around one-fifth of global crude and LNG supply crossed through Hormuz.

Countries increasingly lost hope after the planned meeting between Iran and the Gulf states for establishing a secure shipping channel through Hormuz was postponed. The Houthi advance toward Bab el-Mandeb is also causing concern as it is threatening to close both main Regional escape routes.

The disruption of China’s pipeline imports of natural gas intensifies the global LNG market. QatarEnergy requests multi-year U.S. LNG contracts through 2031 to compensate for capacity losses from Iranian attacks. This demonstrates how the conflict directs global gas demand to U.S. suppliers.

Fundamental bias: USAOIL and UKOil are considered bullish. Natural Gas index is slightly bullish.

WTI Crude Oil Technical Analysis: USOIL Holds Above $98.78 as $105.48 Resistance Remains the Next Test

WTI crude oil trades at a level close to $102.67 on the daily chart after pulling back somewhat from the recent push toward the level of $105.48. What is of interest is that price continues to stay comfortably above the level of $98.78, the Fibonacci extension, while price is supported by a rising trendline and both moving averages. For now, the overall trend is considered bullish, even on the slowing momentum.

The level of $105.48 is the first resistance level. A higher level beyond that is around $112.87, and even beyond that, is the level of $118.12. The first level of support is the level of $98.78, and a deeper pullback would make the level of $93.51 important. Below that, the level of $86.11 would be important along with the level of $83.83.

RSI is elevated, but shows momentum as strong, though not as comfotable as it used to be earlier on the break out. As long as WTI holds above the level of $98.78, I will keep my bias bullish. However, a break of the level of $93.51 on a daily close would make me lose this bias, and a firm break above the level of $105.48 would make me consider the level of $112.87 next.

WTI Crude Oil Technical Analysis: USOIL Holds Above $98.78 as $105.48 Resistance Remains the Next Test

WTI crude oil trades at a level close to $102.67 on the daily chart after pulling back somewhat from the recent push toward the level of $105.48. What is of interest is that price continues to stay comfortably above the level of $98.78, the Fibonacci extension, while price is supported by a rising trendline and both moving averages. For now, the overall trend is considered bullish, even on the slowing momentum.

The level of $105.48 is the first resistance level. A higher level beyond that is around $112.87, and even beyond that, is the level of $118.12. The first level of support is the level of $98.78, and a deeper pullback would make the level of $93.51 important. Below that, the level of $86.11 would be important along with the level of $83.83.

RSI is elevated, but shows momentum as strong, though not as comfotable as it used to be earlier on the break out. As long as WTI holds above the level of $98.78, I will keep my bias bullish. However, a break of the level of $93.51 on a daily close would make me lose this bias, and a firm break above the level of $105.48 would make me consider the level of $112.87 next.

Brent Crude Oil Technical Analysis: UKOIL Holds $104.08 Support as $110.10 Breakout Stays in Focus

The daily chart shows Brent crude trading at $107.21 from its prior position at the $110.10 resistance area. I am looking at the fact that Brent is holding above $104.08 Fibonacci support. Brent is also holding above both its moving averages. This suggests that the weakness in the market is most likely a consolidation.

Price is currently trading at $110.10. This level is the first resistance area, and a break above this level will expose $114.48 and $119.21. Price is currently trading at $104.08 Fibonacci support. Below that are $100.36 and $97.35. Further still is the support level at $94.34.

Bullish market momentum is supported as the RSI is trending below the overbought zone but is still above the midline. I am bullish as long as Brent trades above $104.08.This will also give traders to enter at support. A break below $100.36 will be bearish while a break above $110.10 will make the next target $114.48.