Oil and Natural Gas Technical Analysis: Dollar Strength Drive Diverging Trends

The oil market saw a significant drop on Monday, continuing last week’s losses as the US dollar continued upward momentum after the US election. The concerns about Chinese demand persist, driven by weak industrial data and slowing consumer price growth. This indicates lower oil demand from the world’s largest importer.

The US dollar is strengthening, putting downward pressure on oil prices. The strength of the US dollar makes oil more expensive for holders of other currencies, further impacting demand. Traders expect continued currency impact on the oil market, with the dollar rallying on election-related optimism. The release of Consumer Price Index (CPI) data on Wednesday will further impact the oil and commodity market. WTI crude oil (CL) has dropped below $69, and Brent oil (BCO) has dropped below $72, signalling further downside momentum.

On the other hand, natural gas (NG) markets are experiencing a surge, with US natural gas prices opening significantly higher on Monday. This increase follows a recent technical reversal, with prices trading above a critical pivot point of $2.40. This level may act as strong support. Additionally, Storm Rafael has disrupted production in the Gulf of Mexico, adding a bullish factor for natural gas amid ongoing shutdowns. As Chevron and Shell begin restoring Gulf operations, natural gas prices remain sensitive to the timeline of these production resumptions. The price movement in natural gas indirectly complements the oil market narrative. Energy investors focus on the impacts of currency dynamics after the US election and weather-related supply disruptions.

WTI Oil (CL) Technical Analysis

WTI Daily Chart – Descending Broadening Wedge

The daily chart for WTI crude oil shows a price pattern indicating bearish pressure within a descending broadening wedge. Prices are fluctuating between $62 and $80. Monday’s price drop has intensified bearish pressure, suggesting prices may decline toward $62. The price remains below the 50 SMA, and the RSI has broken below the midline, indicating bearish pressure.

WTI 4-Hour Chart – Bearish Pressure

The 4-hour chart for WTI crude oil shows strong price consolidation between $73 and $69, indicating bearish price development. The RSI is approaching oversold levels, suggesting a potential short-term rebound, but the overall trend remains downward, with initial support at $65.60.

Brent Crude Oil (BCO) Technical Analysis

Brent Daily Chart – Descending Broadening Wedge Pattern

The daily chart for Brent oil shows a bearish trend, with the price moving toward the support level of $68.60. The lower boundary of an ascending broadening wedge pattern defines this support level. The breakout from this ascending broadening wedge, followed by a retest, indicates bearish pressure. The price remains below the 50 and 200 SMA, suggesting a downward movement.

Brent 4-Hour Chart –Bearish Pressure

The 4-hour chart shows price consolidation with no clear direction. However, the continuation below $80 indicates price weakness and suggests a move toward $68.60. The RSI is approaching oversold levels, but bearish pressure persists, indicating that the market will likely remain downward.

Natural Gas (NG) Technical Analysis

Natural Gas Daily – Long-Term Breakout

The daily chart for natural gas shows a strong price surge, indicating movement toward the triangle resistance at $2.65. The price is attempting to break this resistance area, which could trigger a significant rally in natural gas prices. The emergence of a double bottom around the $2.16 area demonstrates bullish potential and increases the chances of an upward breakout. However, if prices encounter resistance around $2.66, a correction may occur before the next surge.

Natural Gas 4-Hour Chart – Upward Momentum

The 4-hour chart for natural gas shows a breakout above the descending channel. Before the breakout, the price formed an inverted head-and-shoulders pattern and reached strong resistance at $2.66. A break above this level could push prices to the $2.80 resistance. The price pattern in natural gas suggests an emergence from a long-term bullish formation. Based on the short-term pattern developments, the prices will likely continue to follow the long-term upward trend.