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Natural Gas and Oil Forecast: Strait of Hormuz Standoff Intensifies – Is $105 the Next Target?
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Key Points:
- Hormuz Escalation: Iranian forces reportedly fired on commercial ships this week, sharply raising the global oil risk premium.
- WTI Breakout: Crude has broken its descending channel, with the 200-day EMA near $92.00 now acting as a solid floor.
- Storage Glut: Natural Gas inventories rose by 103 Bcf, crushing the $2.60 demand zone as mild shoulder-season weather persists.
- Diplomatic Deadlock: Despite Trump's ceasefire extension, Iran’s refusal to negotiate without lifting the blockade keeps markets on edge.
Market Overview
The oil price for OIL (WTI Crude) has spiked to a level of around $95 to $97 a barrel – and the reason is pretty straightforward – US-Iran tensions are escalating, and the Strait of Hormuz is now almost completely blocked, which is causing all sorts of problems for oil supply – in fact in March, global crude supply dropped sharply. OPEC + cut back on production and with the infrastructure risks in the Middle East getting tighter, it all adds up to a perfect storm for oil prices – they’re now at a multi-month high.
But on a completely different note, Henry Hub futures have taken a dive to around $2.57 per million BTUs, which is the lowest they’ve been in a pretty long while – basically because of massive builds in storage – the EIA reported that there was a 103 BCF (that’s billion cubic feet) injection in storage – which is way more than the average for the past 5 years – we’re talking around 7 per cent above normal – and we’re still in the midst of mild spring weather and really weak heating demand.
They’ve also reported that production has actually slipped quite a bit – and on top of that, the US has been shipping a lot of gas overseas in the form of LNG, but the point is that gas is plentiful and that’s what’s really driving the market – too much supply.
Natural Gas Slides Toward $2.56: Breakdown Below Demand Zone
Natural Gas is trading around $2.56 and is now breaking down below a key support zone between $2.60 & $2.63 and is just continuing on with its overall downtrend within a descending triangle structure. Price is still below the 50 EMA and the 200 EMA – so that tells us the bearish trend is still in place.
Recent candles are looking pretty bearish with very little sign of any reversal – just a lot of selling pressure. RSI has dropped below 40 which just confirms the downward momentum.
Looking at immediate support levels, we’ve got $2.53 and then $2.45. If we see a recovery above $2.63 then that might start to stabilise things a bit and could start to shift our short-term view.
Trade idea: Sell below $2.60, target $2.53 and get stopped out above $2.63.
WTI Crude Oil Reclaims $97.60: Breakout Building Above Channel Resistance
WTI is trading near $97.61 after a solid bounce from $85.30 – a level we’d previously seen as a support – and is now trying to break out of that dominant descending channel. Price has made a comeback & is holding above the 50 EMA, while the 200 EMA which was near $92.00 has actually flipped into support – showing a definite shift in the market’s structure.
Recent bullish candles are showing good strength and pretty tight upper wicks, which suggests to me that buyers have got the upper hand. RSI is heading up towards 65 which says the upward momentum is growing.
Now we’re looking at a couple of levels of resistance in the short term: $100.60 and then $105.75. On the downside, $95.30 is looking like a key support level to keep an eye on.
Trade idea: Buy above $98.00, target $100.60 and get stopped out below $95.30.
Brent Crude Tests $101.00: Trendline Break Signals Upside Shift
Right now Brent is trading near $100.88 and is getting close to that significant descending trendline at $101.30. It’s already broken above $99.50 so now it’s just consolidating above the 50 EMA, and that 200 EMA near $96.00 is acting as a bit of a safety net.
There’s been a bit of a rally going on and the bullish candles are all looking pretty good – except for just a tiny bit of hesitation at the trendline resistance, which is always a good thing to keep an eye on.
RSI is above 60 which says the momentum is good. If we do get a confirmed break above $101.30 then we could be looking at $107.20 or even $111.50 and on the flip side if we fail then we might see a pullback to $99.50.
Trade idea: Buy a breakout above $101.30, target $107.20 and get stopped out if price goes below $99.50.
About the Author
Arslan Aliauthor
Arslan is a finance MBA and also holds an MPhil degree in behavioral finance. An expert in financial analysis and investor psychology, Arslan uses his academic background to bring valuable insights about market sentiment and whether instruments are likely to be overbought or oversold.
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