Natural Gas, WTI Oil, Brent Oil Forecasts – Crude Rises on Fed Chair’s Rate Cut Hints

By:

James Hyerczyk

Published: Mar 6, 2024, 18:50 UTC

Key Points:

Natural gas stable, facing production cuts and storage increase concerns.
WTI crude gains on Powell's rate cut hints and rising demand.
Brent crude seeking support at 200-day MA for potential rally.

Natural Gas

Daily Natural Gas

Natural gas is trading steady to lower trend on Wednesday, with trading patterns reflecting investor uncertainty and potential for upcoming volatility. Market support stems from anticipated production cuts by key producers throughout the year. However, concerns about an increase in storage, based on the upcoming government report, are limiting gains.

Technically, a pivotal moment occurred on February 20 with the market bottoming at a multi-decade low, adjusted for inflation. This coincided with Chesapeake’s announcement to reduce output in 2024. Additionally, EQT, a major Appalachian driller, significantly cut its production by about 15% in late February, with plans to maintain this reduction into March and reassess thereafter, echoing Chesapeake’s strategy. Since then, natural gas prices have climbed roughly 25%.

Should the upward trend persist, the market may encounter resistance at the 50-day moving average. Given the long-term downward trend, new short-sellers might emerge at this level. Nevertheless, this moving average could also serve as a catalyst for further upward movement.

WTI Oil

Daily Light Crude Oil Futures

WTI Crude oil futures experienced an uptick on Wednesday, influenced by Federal Reserve Chair Jerome Powell’s remarks indicating potential interest rate reductions later this year, albeit with a cautious approach. Speaking to the House Financial Services Committee, Powell emphasized the need for more data before adjusting rates, though he is optimistic about policy loosening in 2023 as inflation control becomes more assured.

Powell suggested in his prepared statement that the Fed believes interest rates have reached their peak. Lower rates typically boost economic activity, subsequently increasing crude oil demand. However, the uncertainty regarding the timing of these rate cuts remains a significant barrier to a sustained oil rally.

Upcoming financial events, including Powell’s testimony and the European Central Bank’s interest rate decision, might fuel expectations for a rate cut as early as June. On the supply side, U.S. commercial crude inventories rose by 1.4 million barrels last week, reports the Energy Information Administration. This build is notably lower than previous weeks, as refineries ramp up processing of crude into finished products.

Concurrently, U.S. gasoline reserves saw a substantial decrease, indicating a rise in demand. Oil prices have been on a gradual incline this year, registering gains for two straight months. This trend is supported by OPEC+’s production cuts and ongoing geopolitical tensions in the Middle East.

Technically, the rally is likely to remain intact as long as prices hold above the 200-day moving average at $76.75. The current consolidation suggests traders are waiting for more bullish news before launching a rally into resistance at $82.68.

Brent Oil

Daily Brent Crude Oil

While WTI crude oil is currently running away from its 200-day moving average support, Brent crude oil is still trying to establish solid support at it.

Earlier in the session, the market was underpinned by the 200-day moving average at $82.01. A sustained move over this level could lead to a test of last week’s high at $84.32, which is the trigger point for an acceleration to the upside.

About the Author

James Hyerczykauthor

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.