Crude Oil Attempts to Clear a Tough Barrier; Natural Gas Risks Further Losses

CRUDE OIL, WTI, NATURAL GAS, NG – Outlook:

• Crude oil is attempting to cross above a tough barrier.
• Natural gas has posted a lower high, risking further losses.
• What is the outlook for crude oil and natural gas and what are the key levels to watch?

Crude Oil: Cracks above resistance

Crude oil’s rise above several times tested resistance on a horizontal trendline since the end of 2022 (at about 83.50) has triggered a breakout from a multi-month sideway zone. The break has opened the way toward the October high of 93.00.

The bullish break follows a rise in July above the Ichimoku cloud on the daily charts, and the 89-day moving average, pointing to renewed upward momentum, as pointed out in the previous update (see “More Pain Ahead for Crude Oil? Is the Rebound Over in Natural Gas?” published August 29) and strong support on the 200-week moving average in recent months (see “Crude Oil Extends Slide in Asia: Is This Capitulation?”, published May 4).

Crude Oil Daily Chart

Chart Created by Manish Jaradi Using TradingView

Having said that, the upward momentum associated with the break above 83.50 is feeble compared with price gains. Crude oil needs to sustain gains if the breakout is real. A failure to hold on to the recent gains would raise the odds of a false break higher. In this regard, immediate support is at the resistance-turned-support at 83.50, and stronger support is at the August low of 77.50.

Crude Oil Weekly Chart

Chart Created by Manish Jaradi Using TradingView

Natural gas: Risks further losses

A potential lower top / secondary high created this week in natural raises the odds that the five-month-long rebound is over – a risk pointed out in the past two updates. See “More Pain Ahead for Crude Oil? Is the Rebound Over in Natural Gas?” published August 29, and “How Much More to Go in Crude Oil? Is There More Upside in Natural Gas?”, published August 11.

Natural Gas Weekly Chart

Chart Created by Manish Jaradi Using TradingView

That’s because natural gas has failed to cross above the crucial hurdle at 3.00-3.05 (including the March high and the 30-week moving average). The inability to rise toward the 200-day moving average and the hesistant nature of recovery since early 2023 are signs that natural gas isn’t yet ripe for a renewed bull market. Indeed, natural gas may need to undergo a prolonged period of base building before a sustainable uptrend emerges.

Natural Gas Daily Chart

Chart Created by Manish Jaradi Using TradingView

The possibility of natural gas bottoming was first highlighted in early 2023 – see “Natural Gas Price Action Setup: Is the Slide Overdone?”, published February 21, and subsequently “Natural Gas Week Ahead: Base Building May Have Started”, published May 22, and “Natural Gas Price Rebound Could Extend; What’s Next For Crude Oil?”, published May 18.

Natural gas is testing a vital horizontal floor at about 2.45-2.50. Any break below the support would confirm that the upward pressure had truncated, potentially opening the door toward the May low of around 2.00.

— Written by Manish Jaradi, Strategist for DailyFX.com

— Contact and follow Jaradi on Twitter: @JaradiManish