Natural Gas and Oil Analysis: Geopolitical Strains Fuel Market Volatility

By:

Published: Dec 20, 2023, 12:35 GMT+00:00

Brent crude's ascent over $80 a barrel amidst Red Sea skirmishes has led to heightened trade rerouting, affecting global oil and natural gas prices.

In this article:

Natural Gas

-4.05%

WTI Oil

-0.57%

Brent Oil

-0.89%

Key Insights

Brent and WTI oil prices surge amid Middle East tensions and shipping reroutes.
Natural Gas dips below pivotal point as technical indicators signal bearish momentum.
Oil market adapts to geopolitical disruptions, maintaining supply without shortages.
WTI exhibits bullish trends, challenging immediate resistance levels.
UKOIL’s rise suggests overbought conditions, yet remains in a short-term bullish phase.

Quick Fundamental Outlook

Brent crude surpassed $80 a barrel, a 1.1% rise to $80.12, while WTI increased by 1.3% to $74.87, prompted by trade and geopolitical unrest in the Middle East, especially after Houthi assaults in the Red Sea.

The tension led to rerouting ships, escalating transit and insurance costs. Despite the U.S.-led naval mission, concerns over secure Red Sea passage remain, affecting around 12% of global maritime traffic.

No immediate oil shortages are reported, and markets are adapting to new supply chains. This situation bolsters oil prices, impacting Brent, WTI, and by extension, natural gas markets due to altered energy supply dynamics.

Natural Gas Price Forecast

Natural Gas Chart

Natural Gas (NG) has retreated to $2.43, a drop of 2.53%, with the market gravitating below the pivot point of $2.46. Immediate resistance forms at $2.58, with subsequent levels at $2.71 and $2.85, while supports are found at $2.31, $2.20, and $2.06.

The RSI stands neutral at 51, reflecting a market in balance. However, the MACD at -0.00390 crossing below the signal line of 0.00300 suggests bearish momentum. Additionally, the 50 EMA at $2.45 aligns with a downward trendline, further reinforcing resistance.

With the closing below $2.45 indicating a possible selling trend, the bearish sentiment prevails. The short-term forecast anticipates potential tests of lower support levels unless NG can reclaim ground above $2.45.

WTI Oil Price Forecast

USOIL Chart

Currently, WTI Crude Oil is trading at $74.88, a modest increase over the last 24 hours, as observed on the 4-hour chart. The price action rests comfortably above the 50 EMA, set at $72.33, indicating a short-term bullish trend.

The RSI stands at 63.07, reinforcing the bullish sentiment in the market. Resistance levels are poised at $76.08, followed by $78.07 and $80.14, with support forming at $72.32, $70.17, and $68.00.

The breakout from the descending triangle pattern suggests an accumulation of bullish momentum. Indicators steer towards a bullish bias, with expectations of an approach towards the immediate resistance at $76.08 in the upcoming trading sessions.

Brent Oil Price Forecast

UKOIL Chart

UKOIL has advanced to $80.09, marking a 1.10% increase within the last day, positioned just above the pivot point of $80.07. This recent climb positions it against an immediate resistance at $83.06, with further barriers at $84.85 and $87.05.

Supports are etched at $77.53, followed by $75.24 and $72.44. The RSI at 71 suggests the oil is in overbought territory, potentially foreshadowing a retracement. However, with prices buoyed above the 50 EMA of $77.31, the short-term trend remains bullish.

The presence of a downward trendline extending resistance at $80.10 has been noted, hinting at a pivotal moment for UKOIL. A bullish breakout above this could further cement the buying trend. In the short term, we might expect the asset to test higher resistances if the bullish momentum sustains.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

Arslan Aliauthor

Arslan is a finance MBA and also holds an MPhil degree in behavioral finance. An expert in financial analysis and investor psychology, Arslan uses his academic background to bring valuable insights about market sentiment and whether instruments are likely to be overbought or oversold.

Did you find this article useful?