Natural Gas and Oil Forecast: WTI Triangle Squeeze – Is an $88 Breakout Next?

Oil Volatility Persists as Supply Risks and Diplomacy Collide

The WTI crude price has slumped down to the $87-$89 range, down around 3 to 5.5% after a pretty dramatic reversal that took it all the way back to $92.40, and you can tell this is still all about how global events are playing out. The fact is the energy market has been living and dying on supply uncertainty around the Strait of Hormuz – this chokepoint handles around 20% of the world’s seaborne oil.

When tensions in the region first escalated they gave the price of crude a 5% boost – but now that we’re getting some diplomatic signals and it looks like there might be efforts underway to dial things back, that initial fear is easing and prices are getting knocked back a bit.

Now, even though crude has taken a hit in the short term, some analysts are predicting that we’ll see a structural floor around the $80 mark because until supplies get back to normal and things get sorted out, these kinds of disruptions are going to keep the price of oil in a pretty tight spot. Meanwhile, natural gas and refined fuels are showing a similar kind of volatility – markets are reacting to every shift in risk perception with lightning speed.

Natural Gas Futures Hold $2.86 Support as Trendline Faces Pressure

Natural Gas futures are currently trading around $2.888 on the 2-hour chart & are hovering pretty close to that all important horizontal support zone at $2.866 .Price has recently managed to break below that rising trendline that was drawn from the lows of late February down at $2.78 – which is a pretty clear sign of a weakening in the bullish trend.

The 50-period moving average is currently poking its head out around $3.01 & is doing a pretty good job of acting as a bit of dynamic resistance – while the 200-period moving average is adding some further pressure to the supply side of things at around $2.95.

Candlestick structure is showing us some pretty small-bodied candles with the occasional lower wick popping up at around $2.86 – which is probably a sign that buyers are trying to defend this level. but unfortunately for them the repeated rejection of price above $3.01 is really limiting the upside.

Those of you looking to get a feel for where key levels are should know that $3.014 & $3.087 are the ones that are really causing the problem at the moment – and of course a break below $2.866 could be nasty news with $2.823 & $2.778 potentially exposed as a result.

Trade idea: If you think price is likely to break below $2.866 then a sell down to $2.823 looks like it might be worth a punt – with a stop loss above $2.95 of course.

WTI Crude Oil Compresses Near $88 – Triangle Break Incoming?

WTI crude is sitting round 88.77 on the 2 hour chart, and it’s just consolidating between that rising trendline down at 86.75 and the descending trendline that came in from the highs back in 116.00. Price action has formed a pretty tight triangle, and we can expect to see some expansion out of that in a hurry.

The 50 day moving average is sitting just above 92.65 – that’s our immediate resistance level, while the 200 day moving average is down at 86.75 which just happens to align with our structural support. We’ve got horizontal levels at 92.65 and 97.33 that are capping any upside attempts, while the downside zones are where we’d expect to see price drop – that being 86.75 and 81.53. The Relative Strength Index is hovering just shy of 45, which just suggests that we’re seeing a bit of bearish momentum creeping in.

If we do see a break above 92.65, then 97.33 could be our next port of call. On the other hand, if we see a move below 86.75, then selling could really start to pick up steam and we could see price head down toward 81.53.

Trade idea: Buy above 92.65 with a target of 97.33, and a stop below 88.00.

Brent Oil Slips Below Trendline Support as $98 Break Fails

Brent crude is hovering near 95 bucks after crashing through the trendline that had held up price since the start of march. The recent candles are showing a pretty clear rejection around 105, which is making it plain to see lower highs forming within a weakening trend. The 50 – day moving average is now heading down, which is just adding to the pressure, and as things stand price is sitting below that key 98.35 pivot point.

Right away, you’ve got support at 92.72, then 88.00. Resistance, on the other hand, is more like 98.35 and 105.09 – the whole thing is looking an awful lot like a failed breakout rather than a triangle continuation – just not what we were hoping for.

The RSI is drifting round the 40 mark, which I suppose is a sign that momentum is starting to fade out – it’s not oversold just yet though. That fib retracement level from the recent swing high is hovering just under 92, which pretty much confirms that zone as a place we should be keeping an eye on.

Trade idea: Sell brent if price drops below 95, with a target of 92 and a stop above 98.