More Signs of Natural Gas in Bottoming Process; Sentiment Points to Upside in Crude Oil

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

• Sentiment is bullish as crude oil holds above strong support.
• Natural gas is beginning to flex muscles.
• What is the outlook for crude oil and natural gas and what are the key levels to watch?

Crude oil and natural gas trends appear to be converging. Sentiment in crude oil is quite bullish, raising the prospect of some gains in price. In contrast, natural gas appears to be flexing muscles after months of weakness.

IG Client Sentiment

Data as of 20 June 2023 at 8.02am

Crude Oil: Offsetting currents

Crude oil has barely moved in recent weeks as output cuts by OPEC+ have been offset by a deterioration in China’s economic outlook. However, the IG Client Sentiment shows about 77% of the retail traders are long, even after the 30% reduction in longs in the past week. IGCS can at times provide a sense of future direction, pointing to a rise in crude oil.

Crude Oil Weekly Chart

Chart Created by Manish Jaradi Using TradingView

On technical charts, crude oil has been holding above quite strong converged support on the 200-week moving average (now at about 67.40), slightly above the August 2021 low of 62.10. While the downtrend has seemingly lost steam in recent weeks, upward momentum has been lacking. Unless crude oil breaks above the April high of 83.50, the path of least resistance is sideways to down. For more discussion, see “Crude Oil Extends Slide in Asia: Is This Capitulation?”, published May 4.

Natural Gas Daily Chart

Chart Created by Manish Jaradi Using TradingView

Natural gas: More gains on the cards?

Natural gas is attempting to rise above a crucial converged resistance: the 89-day moving average, the upper edge of the Ichimoku cloud on the daily chart, and the May high. A break above the resistance is needed for the bottoming process to be confirmed. Any break above could open the door initially toward 3.03-3.20 (including the March high and the 30-week moving average). Any break above the converged barrier could expose the upside toward the 200-day moving average (now at about 4.20).

Natural Gas Daily Chart

Chart Created by Manish Jaradi Using TradingView; Notes at the bottom of the page.

The downward pressure has abated in recent weeks as natural gas has found support around the psychological 2.00 mark. As highlighted in recent weeks, the trend is no longer bearish. See “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. 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.

Natural Gas Weekly Chart

Chart Created by Manish Jaradi Using TradingView

Note: The above colour-coded chart(s) is(are) based on trending/momentum indicators to minimize subjective biases for trend identification purposes. Blue candles represent a Bullish phase. Red candles represent a Bearish phase. Grey candles serve as Consolidation phases (within a Bullish or a Bearish phase), but sometimes they tend to form at the end of a trend. Note: Candle colors are not predictive – they merely state what the current trend is. Indeed, the candle color can change in the next bar. False patterns can occur around the 200-period moving average, or around a support/resistance and/or in sideways/choppy market. The author does not guarantee the accuracy of the information. Past performance is not indicative of future performance. Users of the information do so at their own risk.

— Written by Manish Jaradi, Strategist for DailyFX.com

— Contact and follow Jaradi on Twitter: @JaradiManish