Oil and Natural Gas Technical Analysis: Impact of US-China Tensions and Inventory Build

Oil prices continue to decline as traders worry about excess supply and slowing demand from the US and China. Brent crude oil (BCO) dropped near $60, while WTI crude oil (CL) is consolidating around the $56 level. This weakness came despite optimism from President Trump, who said he expected a fair trade deal with China. The unresolved disputes over tariffs and technology continue to weigh on market sentiment. The uncertainty surrounding global trade keeps energy demand forecasts under pressure.

From a technical perspective, oil prices remain under pressure. The rise in US crude inventories has added to the downward pressure ahead of the EIA reports. Meanwhile, geopolitical risks from Russia have offered only limited support. A drone attack on a Rosneft refinery and a strike on a nearby gas plant temporarily disrupted production. However, the market viewed the impact as short-lived. Traders instead focused on the growing supply glut and weak consumption outlook.

The International Energy Agency’s forecast of a 4-million-barrel-per-day surplus by 2026 has reinforced bearish sentiment. OPEC+ and non-OPEC producers are expected to continue increasing output even as global demand lags. This projection signals persistent downward pressure on crude oil. Unless demand improves or production is reduced, oil prices may remain subdued in the coming weeks despite intermittent geopolitical flare-ups.

WTI Crude Oil (CL) Technical Analysis

WTI Oil Daily Chart – Bearish Pressure

The daily chart for WTI crude oil shows that the price has broken below the $60 level and continues to move toward the long-term pivotal area near $55. A break below the $55 zone could trigger strong selling pressure and keep oil prices in a sharp decline.

Oil has remained in a strong downtrend since the beginning of 2025, and a sustained move below $55 would likely add further pressure, pushing prices to lower levels.

The importance of the $55 region is also evident on the weekly chart below, which shows that a break below this level would confirm a breakout from the wedge pattern and the long-term support. This move would likely trigger strong selling pressure in the oil market.

WTI Oil 4-Hour Chart – Descending Channel

The 4-hour chart for WTI crude oil shows that the price is trading within a descending channel after breaking below the $60 level. The short-term price action indicates support around the $56 region. However, any rebound in oil prices is likely to be capped near the $60 area, potentially leading to another downward move.

Natural Gas (NG) Technical Analysis

Natural Gas Daily Chart – Ascending Broadening Wedge

The daily chart for natural gas (NG) shows that prices are trading within an ascending broadening wedge pattern. The price failed to break below the long-term support near the $2.50 region. The 50-day SMA trades below the 200-day SMA, while the RSI holds above the 50 level, signalling strong price consolidation.

A breakout above the $3.50 level would confirm renewed buying pressure in natural gas. As long as prices hold above the key $2.50 level, the overall structure remains strongly bullish.

Natural Gas 4-Hour Chart – Rebound

The 4-hour chart for natural gas shows that it is currently trading below the key resistance zone between $3.50 and $3.60. Notably, this resistance is highlighted by the black dotted trend line. However, a breakout above $3.50 would likely trigger renewed buying pressure, potentially pushing natural gas prices toward the $4.70 level.

US Dollar Index (DXY) Technical Analysis

US Dollar Daily Chart – Consolidation

The daily chart for the US dollar index shows strong consolidation between the 96.50 and 100.50 levels. However, the overall trend remains bearish. Any rebound in the US dollar index is likely to be capped and may trigger renewed selling pressure.

The key resistance remains near 100.50, which also intersects with the 200-day SMA. A break below the 96.00 level would likely introduce strong selling pressure, with downside targets near the 90.00 region.

US Dollar 4-Hour Chart – Negative Price Action

The 4-hour chart shows that the US dollar index is currently experiencing strong consolidation between the 96.50 and 100.50 levels. Notably, the index has formed an inverted head and shoulders pattern near the 96.50 support and a double top around the 99.20 resistance level. Nevertheless, this consolidation does not alter the prevailing bearish trend. Therefore, once the rebound completes, the U.S. dollar index will likely resume its downward move.