Natural Gas and Oil Forecast: Will Hormuz Crisis Send WTI to $120?

WTI Oil Holds Near $100 as Hormuz Crisis Drives Market Volatility

Prices have gone absolutely through the roof in the last few weeks thanks to the intensifying US-Israel-Iran conflict, which has thrown the entire global energy supply into chaos & sent markets into free fall. Crude briefly touched $100 & even hit $119 when the headlines first started coming out about supply shock, but then retreated when word started leaking out about some possible diplomatic progress & emergency reserve releases.

Its the Strait of Hormuz that’s doing all the damage – a pinch point that handles around 20% of the worlds oil and LNG shipments – and we’re seeing closure and security risks there wreak havoc on markets. Tanker attacks and interrupted shipping have added a very real layer of fear into the price of oil.

Some analysts think we might be talking about a possible 8 million barrels per day knocked off the global supply chain, although promises of reserve releases and some producers ramping up their output are offering some faint hope.

The impact so far:

• Oil has seen a crazy jump of 30-40% since the conflict started
• Analysts are warning that $120 to $150 is a very real possibility if things keep going the way they are and that Hormuz disruption continues

Natural Gas Consolidates Above $3.08 Support as Range Tightens

Natural Gas futures are trading in a tight spot at around $3.12 right now – you can see on the 2 hour chart that its stabilised nicely above that up trending support line from 2.77 dollars, which is still the backbone of that broader recovery we’ve been seeing. After price had a bit of a dip down to that $2.96 support zone it’s been consolidating at a pretty steady pace between $3.08 and $3.18. This little mini plateau is a good sign that its finding its footing after that rejection at the $3.49 spike high.

Looking at it from a bigger picture standpoint, price is still firmly above that 200 period moving average at about $3.05, with the 50 period average just above at about $3.17 acting as a bit of a speedbump at the moment.

Trade Idea: You might want to be looking to buy natural gas if/when its breaks the $3.18 resistance – a good target to aim for would be $3.32, just watch out for a drop below $3.05 if things dont go your way.

WTI Oil Consolidates Above $98 Pivot as Bulls Target $103

The WTI crude is hovering around $99.04 on the two hour chart, and for the moment at least it’s holding up nicely above that 0.50 fibonacci level at $98.09 – a key sort of middle ground in the decline from $119.41. Looking at the price action it’s pretty clear that we’re seeing higher lows form off a low point of $81.53, and this is all taking place against the backdrop of the rising trend line that came in off a low of $76.64 – that keeps the short term rally looking pretty solid.

Looking at the very recent candlesticks you can see that they’re sort of stuck trading in a tight range right around $99 – $100 dollars. This is a sign that bulls might be accumulating after we saw a bit of a jump above that 0.382 retracement at $93.05.  The real next level of resistance would come, of course, above $100 – and that would probably expose $103.12, that’s the 0.618 Fibonacci.

Trade idea: If you want to buy some crude near $97.96, a fair target to aim for would probably be $103.12, and you could set your stop loss below $93.05.

Brent Oil Consolidates Near $106 as Bullish Structure Builds

Brent crude is currently trading around $104.60 on the 2 hour chart, and it’s looking pretty bullish right now. The price made a nice bounce back off the $87.10 support and is still going strong. You can see that the price is making higher lows, and that’s supported by the rising trendline that started at $81.36. With price still holding above that 50-period moving average at around $100, it’s looking like the short term trend is still strong.

Looking at the last few candlesticks, we can see that the price is just consolidating underneath that resistance level at $106.56. That’s the same level that’s been capping the rallies after that rejection back at $119.44.

The momentum is still looking pretty good, with the RSI sitting at around 60 – that tells us there’s some steady buying going on, but we’re not getting overbought. If the price does finally break above $106.56, watch out for a bit of a run up to $112.92.

Trade idea: If you want to go long on Brent crude, look to do it above $106.60, targeting $112.90, but be ready to bail out if the price drops below $102.00.