Oil and Natural Gas Technical Analysis: Geopolitical Tensions and Seasonal Demand

The Energy Information Administration (EIA) reported a crude inventory increase of 0.545 million barrels, beating forecasts but still indicating a slowing demand trend. Moreover, the American Petroleum Institute (API) highlighted a much larger buildup of 4.753 million barrels, far exceeding expectations. Despite these numbers, market attention has shifted to escalating tensions between Russia and Ukraine, overshadowing the potential bearish impact of the stockpile data. WTI crude oil (CL) consolidates around $69, while Brent oil (BCO) consolidates around $73.

Natural gas (NG) prices are rising, supported by colder weather forecasts for late November into early December. Predictions by Maxar Technologies indicate a significant temperature drop, increasing heating demand. Moreover, the electricity output is expanding, further boosting natural gas usage. This surge has broken the key levels in natural gas and initiated a solid long-term bullish trend.

The broader energy market reflects contrasting trends between oil and natural gas. While oil prices struggle under geopolitical uncertainty and stockpile data, natural gas receives bullish momentum from seasonal demand. The divergence highlights the influence of varying supply-demand dynamics. Cold weather intensifies gas consumption, while oil faces headwinds from market sentiment and geopolitical risks.

WTI Oil (CL) Technical Analysis

WTI Daily Chart – Consolidation within Bearish Trend

The daily chart below shows that WTI crude oil is consolidating within a bearish pattern. The support level is around $66-$67, while the resistance levels are $71, $74.20, and $79.90, as determined by the trend lines. The trend remains bearish if the price remains below the 50 and 200 SMAs. Moreover, the RSI consolidates below the mid-level, highlighting the potential for downward momentum.

WTI 4-Hour Chart – Wedge Pattern

The 4-hour chart shows strong price volatility, trading between $68 and $70. The RSI also consolidates between the 20 and 80 levels, indicating that prices are range-bound. A break above $74 will ease bearish pressure, while a break below $66 could initiate a significant decline. The wedge formation on a 4-hour chart defines these price ranges.

Brent Crude Oil (BRENT) Technical Analysis

Brent Daily Chart – Descending Broadening Wedge

The daily chart for Brent oil shows that the price trades within a descending broadening wedge pattern. The downward trend line within this pattern further emphasizes the bearish momentum in Brent oil. Moreover, the RSI trades below the mid-level, reinforcing the bearish outlook. A break above the 200 SMA at $80 will ease bearish pressure and potentially initiate the next upward move.

Brent 4-Hour Chart – Lack of Direction

The 4-hour chart for Brent oil shows no clear direction and indicates strong consolidation. The RSI also consolidates within tight ranges, suggesting a lack of clear movement for Brent oil. Escalating geopolitical tensions in Ukraine has slightly lifted oil prices but has not provided any definitive direction.

Natural Gas (NG) Technical Analysis

Natural Gas Daily – Long-Term Breakout

The daily natural gas chart shows that the price has broken out of an 11-month triangle pattern and reached the strong resistance level of $3. A break above this level could pave the way for $3.40, a resistance level identified in January 2024. Moreover, a break above $3.40 would open the door for significantly higher natural gas prices. The emergence of a double-bottom formation around $1.90 and $2.20 indicates bullish price action and increases the likelihood of sustained bullish momentum.

Natural Gas 4-Hour Chart – Cup Pattern

The 4-hour chart for natural gas shows the formation of a cup pattern. The price has broken out of this pattern at $2.80 and reached the initial resistance at $3. The price is approaching overbought levels on the 4-hour chart and will likely encounter resistance in the $3 to $3.40 price zone. A price correction from this region may find strong support around $2.80, potentially leading to higher price levels. The cup formation indicates bullish solid price action and suggests the continuation of bullish momentum.