Natural Gas and Oil Forecast: Hormuz Crisis Sparks 2% Oil Rebound – Rally or Trap?

Key Points

• WTI rebounds over 2% to $86 after a 12% crash as Hormuz tensions slash 6M bpd supply.
• Strait of Hormuz disruption tightens global crude flows, fueling fresh oil price volatility.
• IEA proposes record oil reserve release, but prices climb as traders doubt impact.

Market Overview

WTI crude futures made a U-turn early on, swinging back up to trade more than 2% higher, hovering around $86 a barrel on Wednesday after experiencing a 12% drop the previous day. Traders are closely monitoring the situation in Iran, with US Defence Secretary Pete Hegseth indicating that the upcoming day could see intensified military strikes.

The ongoing crisis has led to a significant reduction in oil output from major Middle Eastern producers, with a loss of over 6 million barrels per day due to the near-total shutdown of the Strait of Hormuz. A report from the Wall Street Journal regarding the IEA's proposal for the largest coordinated release of oil reserves in history provided a brief moment of relief, but prices quickly resumed their upward trend.

The G7 has expressed support for the release of oil reserves, but no concrete actions have been taken yet. OPEC is expected to release its assessment of the current state of global crude supplies later today.

Natural Gas Futures

Natural Gas futures are currently trading around $3.07, maintaining above a key support level at $3.02. The 50-Day Moving Average at $3.10 is acting as near-term resistance, with additional resistance levels at $3.166 and $3.265. Recent trading activity shows smaller candle sizes, indicating a cooling momentum after a sharp rejection from $3.36.

The RSI is hovering around 45-50, suggesting a neutral bias after previously being overbought. A break above $3.166 could target $3.265, while a close below $3.02 could expose $2.889.

Trade Idea: Consider buying if the price breaks above $3.17, targeting $3.26 with a stop loss below $3.00.

WTI Crude Oil Outlook

WTI is currently trading around $85.22, holding above a key support level of $82.66 after a significant drop from $101.82. The price is currently trapped in a range between $82.66 and $88.00, with the 50-Day Moving Average acting as near-term resistance. The 200 MA and a rising trend line around $78-$80 provide deeper support.

The RSI is around 45, indicating a neutral bias. A break above $88 could target $91.01, while a drop below $82.66 could open up $78.41.

Trade Idea: Consider selling if the price breaks below $82.60, targeting $78.40 with a stop loss above $88.20.

Brent Crude Oil Outlook

Brent crude is trading around $89.24, nearing a resistance level at $90.34 after a pullback from a spike high of $111.06. The price is currently in a range between $90 resistance and $81.36 support, with the 50-Day Moving Average at $90 acting as a magnet for prices.

The RSI is also around 45, indicating a neutral bias. A break above $90.34 could target $95, while a drop below $81.36 could expose $76.16.

Trade Idea: Consider selling if the price breaks below $81.30, targeting $76.20 with a stop loss above $90.50.