Natural Gas and Oil Forecast: WTI Under $90 While Brent Tests $92 — NatGas Retest in Focus?

Oil Markets Hold Amid Geopolitical Strain and CPI Aftermath

As of June 11, crude fundamentals for WTI and Brent, along with US natural gas fundamentals, continue to show the impact of the disruption of flows through the Persian Gulf associated with the Iran conflict. Yesterday, May consumer prices data exceeded expectations, confirming the persistence of inflation in the US.

For these reasons, the closure of Hormuz has resulted in the shut in of roughly 10-11 million barrels per day of production in the region, depleting inventory worldwide even as the prospects of normalised flows are slowly coming to life. This trend remains true for Brent and WTI crude where lower inventory buffers, record SPR releases and higher refinery runs all support prices in the event of persistent supply deficits into the third quarter absent a full reopening. While there are expectations for some demand destruction associated with higher prices and a slowdown in global economic growth, the markets appear well supported and any expectations for oversupply in the near term seem misplaced.

In contrast, natural gas markets are differentially supported. The Henry Hub has the support of higher associated gas linked to oil activity and high inventory levels and despite higher US LNG exports, supply growth still outpaces domestic demand while the price differential associated with EU and Asian markets is a drag on prices linked to the uncertainty around flows in the LNG trade post conflict.

Again, this landscape reflects current and expected prices and will vary over time as the current crisis evolves. While Hormuz remains closed, tight physical market conditions are expected to be the dominant factor, although demand destruction is not impossible should the conflict escalate, with industrial and electric power consumption remaining at elevated levels. While the US CPI will continue to be supported by energy prices, fiscal and monetary responses to the CPI print will ultimately impact consumption.

Natural Gas Futures Steady at $3.131 – Blue Channel Retest on 2h

Natural Gas futures are trading at $3.131 on the 2-hour NYMEX chart. Mixed colored candles are now retesting the red moving average at $3.20 within a blue ascending channel. The lower trend lines were formed from the low price of $2.978. Buyers are now absorbing the supply and are now trading in an upward trend, holding the higher lows.

The RSI is currently at 50, which indicates it is at its neutral point. Volume profile marks $3.10 as key support pivot, with the market currently in demand at that price. Looking at the Volume profile, it indicates that the supply at $3.24 should be consumed with this price. This will allow for a rally towards the $3.203 to $3.283 area of the Fibonacci extension of price targets.

The market trend is bullish and buyers are currently in control with the market price currently above $3.085 inside an ascending channel extending from the May low. Buyers are currently absorbing and maintaining higher highs and higher lows. The market is currently in a clear ascending channel, indicating a bull trend with buyers sustaining all selling rallies.

Trade Idea: Buy $3.131 targeting $3.203, stop $3.085.

WTI Crude Oil Falls to $89.20 – Red Continuation Below Blue Channel on 2h

WTI Crude oil is currently trading at $89.20 on the 2-hour time frame. Recent red candles have penetrated the blue channel support at $91.93 and are testing the red 50-period moving average at $93.68. Bearish engulfing candles with wicks pointing down formed fresh lower lows from the $96.96 high, indicating significant distribution.

This suggests the $88.00 to $86.44 Fibonacci extension is likely to be reached next given that the overhead resistance has not been surpassed. RSI is trending toward 45, suggesting there is a decrease in bullish momentum.

Looking at the Volume profile, it indicates that the $92 to $94 area represents an area of heavy supply. With the white declining trendline originating from the early April high, market pressure remains strong. As price is now clearly below $91.93 in a wide descending channel from $102, the market trend is extremely bearish. The market is also forming lower highs and lower lows and buyers are not able to sustain any recovery in price.

Trade Idea: Sell $89.20 targeting $88.00, stop $90.50.

Brent Crude Oil Drops to $92.09 – Red MA Rejection on 2h

Brent Crude Oil is at $92.09 on the 2-hour timeframe. Red candles have been rejected at the red 50-period moving average at $95.28 and broke the blue channel at the lower levels. Mixed colored candles are currently making lower highs while distributing and trading around $91.93, which is a pivot point. The RSI, at 46, is indicating some weakness. From a Volume profile perspective, it indicates that the $94 to $96 area is an unfulfilled fair value area.

This would indicate that the $89.88 to $88.00 area is where the support would be from a Fibonacci point of view, with both price points being a confluence. The market trend is neutral-to-bearish below $93.68 with selling pressure with the price currently in a wide channel extending from the May $104 highs. The candles show that price is getting rejected at the $95 level.

Looking at the candle wicks, it is clear that the candles form a pattern where there are rejection wicks at the highs, implying the selling is very strong on rallies.

Trade Idea: Sell $92.09 targeting $89.88, stop $93.50.