Oil and Natural Gas Technical Analysis Following PBoC’s Rate Cuts

On Monday, the People’s Bank of China (PBoC) announced larger-than-expected interest rate cuts. The PBoC reduced the one-year Loan Prime Rate by 25 basis points to 3.1%. Additionally, they cut the five-year Loan Prime Rate to 3.60%. These rate cuts aim to revive economic growth and stimulate the struggling real estate sector. This decision has improved the outlook for oil demand, as China is the world’s largest oil importer. The more aggressive rate cuts signal the Chinese government’s intent to boost consumption. This lifted oil prices, which had been sluggish due to uncertainty around China’s stimulus measures.

Geopolitical factors have also reduced some volatility in the oil market. Israel’s decision not to target Iran’s oil and nuclear facilities has eased concerns about potential supply disruptions. These factors have supported the oil market, though uncertainty remains. WTI crude oil (CL) rebounded higher on Monday, reaching a high of $70.36, while Brent oil (BCO) hit a high of $74.24.

On the other hand, mild weather forecasts across the US are impacting natural gas (NG) demand. October has brought higher-than-expected temperatures in many regions, reducing heating needs. Natural gas prices have seen a rebound from support levels.

WTI Oil (CL) Technical Analysis

WTI Daily Chart – Reversal After PBoC’s Rate Cuts

WTI crude rebounded within the bearish trend after the PBoC rate cuts. However, the overall trend remains downward, and WTI crude faces bearish pressure. The price needs to close above $71.80 to ease this bearish pressure. The market will likely consolidate in ranges as the price stays below the 50 and 200 SMAs on the daily chart.

WTI 4-Hour Chart – Lack of Direction

WTI crude oil is trading within an ascending channel on the 4-hour chart. The price shows weakness as it trades below the black-dotted trendline. A break below $66.40 could initiate a strong price drop in WTI crude oil.

Brent Oil (BCO) Technical Analysis

Brent Daily – Descending Broadening Wedge

Brent oil is forming a descending broadening wedge pattern on the daily chart. The price remains below the 50 and 200 SMAs, and the RSI trades below the midline. Monday’s rebound for Brent oil was capped at $74.23. Due to the formation of a broadening wedge pattern, volatility is expected to escalate.

Brent 4-Hour Chart – Ascending Broadening Wedge

Brent oil remains in a bearish trend on the 4-hour chart. However, the price hits the support of an ascending broadening wedge. The price rebounded on the PBoC rate cuts but has now reached the RSI midline. Short-term support for Brent oil is at $72.40, and a break below this level could continue the downward momentum.

Natural Gas (NG) Technical Analysis

Natural Gas Daily Chart – Reversal from Strong Support

Natural gas prices rebounded higher on Monday from the 200 SMA support level. The price is currently trading between the 50 and 200 SMA, looking for its next direction. The price fluctuates around the $2.24 support zone, as indicated by the black dotted trendline. This trendline forms the neckline of a double-bottom pattern. Natural gas has a strong support zone between the $2.08 and $2.24 levels.

Natural Gas 4-Hour Chart –Rebound from Support

The 4-hour chart shows that natural gas prices found support around the $2.24 zone after breaking down from the ascending broadening wedge pattern. With the RSI in highly oversold territory, the price rebounds to recover from the bottom. A break below $2.08 could further decline natural gas prices.