Natural Gas and Oil Analysis: How OPEC Production Influences Today’s Energy Market

Key Insights

• U.S. oil refineries face reduced profits due to an 80% dip in gasoline margins.
• Overproduction has resulted in gasoline oversupply amidst lukewarm demand.
• Natural Gas prices exhibit bearish signs, trading below its 50-day EMA.
• WTI Oil’s trend remains bearish below $85.40 despite contrasting indicators.
• Brent Oil showcases a bullish trend, particularly above $89.40.

Quick Fundamental Outlook

U.S. oil refineries are ramping up the production of diesel, heating oil, and jet fuel in preparation for the winter months. However, despite these efforts, they’re grappling with diminished profits due to a significant 80% drop in gasoline margins post-summer.

As they aim to replenish low distillate stocks, they inevitably end up overproducing gasoline, resulting in an oversupply during a period of tepid demand. External factors like Russia’s temporary ban on diesel exports, reduced refinery capacity, and sanctions on Russian diesel have further strained diesel supplies.

This situation is reflected in the inventory data: U.S. distillate fuel oil stocks in September were 21 million barrels below the decade’s seasonal average, while European and Singapore stocks lagged by 25 million and 3 million barrels respectively.

This deficit has propelled U.S. heating oil prices to nearly double their seasonal average. Concurrently, U.S. distillate demand surged to an annual high recently. The supply challenges and rising demand have exerted upward pressure on oil prices in both the U.S. and UK markets.

Natural Gas Price Forecast

Natural Gas (NG), in recent trading sessions dated October 19, exhibited a subtle decline of 0.42%, setting its price at $3.351. Analyzing the 4-hour chart timeframe, the pivot point is distinctly established at $3.38. Traders and investors should be vigilant about several key resistance and support levels.

Specifically, resistance levels are earmarked at $3.46, $3.58, and $3.66, while support is mapped out at $3.26, $3.17, and $3.06. In terms of technical indicators, the RSI stands at a bearish 43, signalling potential downward sentiment. However, the MACD, a widely respected indicator, suggests a glimmer of upward momentum as its line has surpassed the signal line.

The 50-day Exponential Moving Average, priced at $3.36, further corroborates the bearish narrative, with Natural Gas trading below this mark. Current chart patterns, especially the 38.2% Fibonacci retracement, indicate substantial resistance at $3.38.

With a bearish engulfing pattern also in view, the short-term trend leans towards bearishness beneath $3.36.

WTI Oil Price Forecast

On October 19, WTI Crude Oil (WTI)‘s technical landscape presented intriguing insights. In the context of the 4-hour chart, the commodity experienced a drop of 3.04%, settling at $85.52. Its pivot point rests at a significant $87.83. For traders navigating the oil landscape, the ensuing resistance levels at $89.84, $91.48, and $93.46 might serve as crucial benchmarks. On the flip side, support is anticipated at $85.25, followed by $82.56 and $80.58.

Delving into technical indicators, the RSI stands at a bearish 41, suggesting the momentum tilts towards the sellers. The MACD’s negative value, coupled with its position below the signal line, further underscores the bearish sentiment, indicative of potential downward momentum.

Surprisingly, the 50-day Exponential Moving Average is priced closely at $85.40, with WTI Oil trading slightly above this mark. However, a contrasting upward regression channel observed on the 3-hourly chart hints at a potential upward shift.

Summarizing, while there’s an undercurrent of bullish sentiment, the overall trend for WTI Oil remains bearish below $85.40. In the short-term, WTI may challenge the lower support levels, especially if it sustains below the pivotal $85.40 mark.

Brent Oil Price Forecast

For Brent oil, October 19 paints an intricate tapestry of bullish undertones, albeit with slight hesitations. Trading at $89.61, Brent Oil recorded a 1.86% decline over 24 hours, echoing in the corridors of the 4-hour chart. With a pivot point firmly entrenched at $91.27, traders can expect resistance at $93.39, $95.30, and further at the $97.91 mark. Conversely, the floor seems to be established at $88.89, then down to $87.18 and potentially as low as $85.08.

Turning to the technical indicators, the RSI sits tentatively at 47, leaning toward a bearish sentiment, yet not deeply so. The MACD paints a similar story, positioned below the signal line, suggesting a potential downward trend. Yet, an upward channel on the 4-hour timeframe, coupled with the 50-day EMA nestled at $89.47, seems to serve as a supporting bulwark for Brent Oil.

In summation, while pockets of bearish sentiment might emerge, the overarching trend for Brent Oil remains bullish, particularly if it sustains above $89.40. Short-term forecasts could see Brent Oil pushing to test the resistance levels highlighted.

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