Oil and Natural Gas Technical Analysis – Geopolitical Risks and Inventory Data Drive Volatility

Oil prices rose on Wednesday, driven by geopolitical tensions and developments in trade. Iran suspended cooperation with the UN nuclear watchdog, sparking fears of renewed instability in the Middle East. This move added a geopolitical risk premium to oil markets, despite no physical supply disruptions occurring. At the same time, a US-Vietnam trade deal boosted market sentiment and added to the rally.

Brent crude oil (BCO) settled above $69 per barrel, while WTI crude oil (CL) increased to $67.45. However, gains were capped after the US reported a surprise build in crude inventories. The chart below shows that the domestic stockpiles rose by 3.8 million barrels, defying expectations of a drawdown. The weak gasoline demand below 9 million barrels per day raised concerns about consumption during the peak summer driving season.

Traders also took into account upcoming OPEC+ supply increases. The group is expected to raise output by 411,000 bpd in August. Saudi Arabia already increased shipments by 450,000 bpd in June. However, total OPEC+ exports remain steady, suggesting that rising domestic demand in the Middle East may absorb much of the added supply.

Market focus will now shift to the upcoming US jobs report. The strong employment data could delay interest rate cuts, while weaker data may accelerate monetary easing. Moreover, the lower rates would likely support economic activity and boost oil demand. However, geopolitical risks and inventory data will continue to drive short-term price movements.

WTI Crude Oil (CL) Technical Analysis

WTI Oil Daily Chart – Strong Volatility

The daily chart for WTI crude oil shows that the price rebounds from $66, which represents a long-term support range. This support zone is highlighted in orange on the daily chart. The price is currently consolidating between the 50-day and 200-day SMAs, awaiting its next move. The sharp correction from the $77 level, followed by consolidation above $66, reflects growing price uncertainty.

WTI Oil 4-Hour Chart – Double Top

The 4-hour chart for WTI crude oil shows that the price is consolidating within the $64 to $67 range. The formation of a double top near the $77 region indicates negative price action. However, ongoing geopolitical tensions in the Middle East are contributing to increased price uncertainty, which may lead to heightened volatility in oil prices.

Natural Gas (NG) Technical Analysis

Natural Gas Daily Chart – Key Level of $3

The daily chart for natural gas shows that the price is consolidating above the 200-day SMA, indicating bullish price action. As long as the price remains above the $3 level, the potential for further upside remains intact. A break below $3 could push prices toward $2.70, which acts as long-term support, marked by the neckline of the cup and handle pattern. Conversely, a break above $4 would likely trigger a move toward the $5 area in natural gas.

Natural Gas 4-Hour Chart – Consolidation

Strong consolidation is observed on the 4-hour chart for natural gas. Since peaking near the $5 level in March, the price has gradually declined toward the $3 region. It is now trading within a tight range between $3 and $3.80, awaiting the next directional move. A break below the $3 level would signal further downside in natural gas prices.

US Dollar Index (DXY) Technical Analysis

US Dollar Daily Chart – Bearish Pressure

The daily chart for the US Dollar Index indicates that it remains under bearish pressure, currently trading below the 100.65 level. However, the index has entered oversold territory, as indicated by the RSI, suggesting a potential rebound from this region. As long as the index stays below the 50-day SMA, near the 99 level, the bearish trend is likely to continue.

US Dollar 4-Hour Chart – Descending Channel

The 4-hour chart for the US Dollar Index shows that it is trading within a descending channel. The index failed to break above the 100.50 level, which initiated a move toward the 96 area. A break below 96 would likely take the index toward the 94 region, aligning with the descending channel’s support line. However, a break above 100.50 would signal potential for further upside.