Natural Gas and Oil Forecast: WTI, Brent Rally as Hormuz Supply Risks Deepen

Key Points

• Reduced traffic through the Strait of Hormuz and escalating U.S.-Iran tensions are increasing the supply-risk premium for crude oil.
• Middle Eastern crude shipments are significantly lower than previous levels, although alternative supply routes and non-Middle Eastern production provide some relief.
• OPEC+ has maintained its production policy for October, indicating no immediate supply response to the recent Gulf disruptions.

Market Overview

On September 9, oil prices surged due to escalating military tensions between the U.S. and Iran, impacting shipping and energy sectors. The U.S. reported the destruction of five Iranian oil tankers following Iranian attacks on U.S. Navy vessels. In retaliation, Iran targeted a U.S. base in Jordan and attacked multiple vessels in the Strait of Hormuz, raising concerns over Gulf export security.

Traffic through the Strait of Hormuz has sharply declined, with only six commodity vessels crossing on a recent Tuesday, down from an average of nine. This strait is crucial for U.S. WTI and Brent crude, especially as Saudi Arabia faces attacks on its energy infrastructure from Iranian-backed groups.

Supply Dynamics

The physical market for crude oil is tightening, with Middle Eastern shipments dropping to approximately 11 million barrels per day, down from 18 million barrels prior to the conflict. While alternative supply routes and increased production from the U.S., Canada, and Guyana have mitigated some impacts, reduced demand from China has also played a role in stabilizing the market.

OPEC+ has opted to keep its production policy unchanged for October, focusing on future quota negotiations rather than responding to current disruptions.

Natural Gas Outlook

The ongoing crisis in Iran is intensifying competition for liquefied natural gas (LNG) between Europe and Asia, particularly as Qatari LNG exports are affected. Europe may rely more heavily on U.S. LNG this winter due to low gas storage levels, particularly in Germany, which are at their lowest in 15 years.

Technical Analysis

Natural Gas

Natural gas prices have fallen to $2.88, breaking below the $2.92 mark. The critical support level is now at $2.87; a breach could lead to further declines to $2.83 and $2.80. Conversely, if prices rise above $2.92, resistance levels at $2.96 and $3.00 may be tested.

WTI Crude Oil

WTI crude is currently at $94.13, with support found around $92.15. A breakout above $94.89 could lead to further gains towards $97.23 and $99.85. If the price falls below $92.15, it may indicate a continuation of the bearish trend.

Brent Crude Oil

Brent crude is trading at $99.30, having recently tested the $96.95 level, which has now become support. A breakthrough at $99.41 could signal a new upward trend, with potential resistance at $103.23. The market remains bullish as long as prices hold above $96.95.