Oil and Natural Gas Technical Analysis: Geopolitical Tensions and Weak Demand Drive Price Swings

WTI crude oil (CL) rebounded from the technical support on Wednesday due to rising geopolitical risks. Poland downed Russian drones in its airspace, sparking NATO concerns. Meanwhile, Israel struck Hamas leaders in Doha, increasing tensions in the Middle East. These events raised fears of potential supply disruptions, supporting oil prices.

The U.S. urged the EU to impose 100% tariffs on China and India, both major buyers of Russian oil. The move aims to pressure Moscow into entering peace talks. EU leaders also signalled a faster phase-out of Russian energy. However, markets remain sceptical about actual supply disruptions. Without direct interruptions, geopolitical risk premiums may fade quickly.

Despite the geopolitical rally, oil gains were capped. U.S. crude inventories increased by 3.9 million barrels last week. Gasoline and distillate stocks also increased significantly. This unexpected build signals weak near-term demand.

The market now expects the Fed to cut rates in September. Upcoming inflation data will likely reinforce these expectations. Lower rates could support economic growth and boost oil demand. However, concerns remain about gasoline usage after the summer driving season. If demand drops sharply, oil prices may struggle to hold gains. For now, oil trades between supply concerns and geopolitical risks.

WTI Crude Oil (CL) Technical Analysis

WTI Oil Daily Chart – Consolidation

The daily chart for WTI crude oil shows that the price has been consolidating within the long-term support band between the $60-$64 region. This support is further reinforced by an ascending channel pattern, with prices rebounding toward the 50-day SMA at $65.30.

As long as the price remains below the 200-day SMA near the $67 level, the outlook for oil prices remains negative. A break below $60 would likely extend the downside move toward $55.50, and a drop below $55.50 could trigger a deeper sell-off in oil prices.

On the upside, the key resistance lies at $77. A decisive break above this level would likely initiate a strong bullish move in oil prices.

WTI Oil 4-Hour Chart – Consolidation

The 4-hour chart for WTI crude oil shows that the price has been trading below the red dotted trendline, indicating bearish price action. Strong resistance remains at the $65.50 level. A break above $65.50 could trigger a move toward the $70 region. On the downside, a break below $60 is needed to confirm further weakness in oil prices.

Natural Gas (NG) Technical Analysis

Natural Gas Daily Chart – Resistance at 50-Day SMA

The daily chart for natural gas shows that strong resistance has formed at the 50-day SMA near $3.20. This resistance may lead to a short-term correction in prices. However, a break above $3.20 could trigger a strong move toward the 200-day SMA at $3.50. On the downside, a break below $2.60 is needed to confirm further weakness. As long as the $2.60 support holds, the price may continue to move higher.

Natural Gas 4-Hour Chart – Rebound

The 4-hour chart for natural gas shows that the price has formed strong support at the $2.60 level and is facing resistance in the $3.20–$3.40 zone. If the $2.90 support holds and the price breaks above $3.20, it will complete a mini inverted head and shoulders pattern on the technical chart. This breakout could trigger a strong move toward the $3.60 to $4.00 region in natural gas prices.

US Dollar Index (DXY) Technical Analysis

US Dollar Daily Chart – Bear Flag Pattern

The daily chart for the U.S. Dollar Index shows that the price has broken below the bear flag pattern near the 97.80 level. After the breakdown, the index rebounded toward this key level but remains weak ahead of the upcoming inflation data.

The release of inflation figures will likely determine the next move in the Dollar Index and commodity prices. Meanwhile, the RSI remains below the 50 level, indicating continued bearish pressure and a likely move lower.

US Dollar 4-Hour Chart – Negative Price Action

The 4-hour chart for the U.S. Dollar Index shows that the index has been consolidating between the 97.20 and 98.60 levels for the past month. This extended consolidation around the key zone is adding to the bearish pressure.

The downside bias remains intact as the index has failed to break above the 100.50 resistance. If upcoming inflation data pushes the index above 100.50, it may ease the short-term bearish pressure. However, a break below 96.50 would confirm a renewed downside move.