Oil, Natural Gas, US Dollar Technical Analysis Following Surprise Drop in US Stockpiles

WTI crude oil (CL) is supported by unexpected shifts in US crude oil inventory levels. The American Petroleum Institute (API) data indicates a surprising 0.573 million barrel draw in US oil stockpiles against the expected 2.3 million barrels. This unexpected drop in inventories signals a tightening supply, which supports oil prices by reducing concerns about market oversupply.

Moreover, geopolitical developments have driven the oil market for the past few months. The statements from the Israeli Prime Minister regarding a potential diplomatic resolution to the war in Lebanon created uncertainty in the oil market. Traders react to signals of reduced conflict in oil-producing regions as it decreases the perceived risk of supply disruptions. However, the US’s recent plan to purchase oil for the Strategic Petroleum Reserve (SPR) offset some of this pressure. The US decision to acquire up to 3 million barrels for delivery by May 2025 adds demand to the market. This additional demand can help stabilize prices amid uncertain geopolitical news.

The strong volatility in the oil market is also impacting the energy sector, including natural gas (NG). The natural gas price fluctuates within a triangle formation and is seeking its next direction. Moreover, the recent ADP employment report showed a strong increase of 233K in private-sector payrolls for October, surpassing expectations of 115 K. September’s payrolls were also revised to 159K from the previously reported 143 K. This robust job growth strengthens the outlook for the US economy. Meanwhile, Q3 GDP data revealed a 2.8% growth rate, just under the expected 3%. Despite falling slightly short, this growth is strong relative to the global economic slowdown. The US dollar index started to drop after the release of these data from the highly overbought regions.

WTI Crude Oil (CL) Technical Analysis

Oil Daily Chart – Volatility within Descending Broadening Wedge

WTI crude oil forms a descending broadening wedge pattern, indicating price volatility. The price fluctuates within wide ranges with a bearish bias. If the price remains below the 50 and 200 SMAs, the direction remains downward toward $62. However, due to high volatility, the price may experience strong rebounds. The surprise oil inventory data initiates a rebound in price, but the trend remains down.

Oil 4-Hour Chart – Price Rebound

The 4-hour chart shows the formation of a bear flag pattern, which has led to a continued price decline. The price rebounds may find resistance around $70, while short-term support remains at $65.60. The short-term direction for the WTI crude oil market remains uncertain.

Natural Gas (NG) Technical Analysis

Natural Gas Daily Chart – Consolidation above 50 SMA

The daily natural gas chart shows price consolidation within a triangle pattern. The price has found support at the 50 and 200 SMAs. The price consolidation above the 50 SMA suggests that natural gas has the potential for higher prices. The strong support for natural gas remains $2.24 and $2.08.

Natural Gas 4-Hour Chart –Descending Channel

The 4-hour chart for natural gas shows the formation of a descending channel. The price consolidates within this channel in October. The 4-hour candles display shadows along the black trendline within the channel, which indicates uncertainty in the short-term price direction.

US Dollar Technical Analysis

US Dollar Daily – Overbought Region

The US dollar index shows price weakness on the daily chart, with shadows on the candles over the past few days. The drop in the US dollar following the release of ADP employment data shows a bearish daily candle. The shadows on recent candles and this bearish candle suggest that the index may be ready for a correction. A break below 103.90 would confirm this. Additionally, the RSI is extremely overbought, signalling the need for a correction.

US Dollar 4-Hour Chart – Correction from Resistance

The 4-hour chart for the US dollar index shows resistance at 104.50, with the index dropping from this level. The RSI is below the mid-level of 50, and the price declines after a consistent rally in October. As the US election outcome is likely to create uncertainty in the market, the US Dollar Index may remain volatile in the short term.