Crude Oil and Natural Gas Analysis: Key Levels and Energy Outlook

What to Know

• Geopolitical tensions involving Iran are adding upside risk to crude oil supply
• WTI crude faces key resistance near $66 and support around $62–$62.60
• A breakout above $66 could open the door toward the $70 level
• Natural gas prices are stabilizing above $3 as traders look ahead to spring
• Weather-driven spikes remain possible, though upside is likely limited

The backdrop for energy at the moment is very interesting because we have a dichotomy between supply and demand in both major energies. And of course, we have some geopolitical aspects to watch out for as well. For example, one thing that is going on at the moment is the very real possibility that the United States of America will launch an attack on Iran. That brings a little bit of concern when it comes to supply of crude oil, whether or not the Iranians try to shut down the Straits of Hormuz or maybe if the Americans damage some of the infrastructure in the Iranian homeland when it comes to oil.

Crude Oil Outlook

The light sweet crude oil market has shown itself to be a little bit choppy over the last couple of days and on Tuesday here it looks like we are hanging out in the middle of the range. The $66 level above is significant resistance and if we can break above there, I think we can take off towards $70. I do see a lot of support underneath current levels near the $62.60 level in the form of the 200-day EMA and the $62 level as it has been important multiple times in the past. That being said, if the US strikes Iran, I would expect a significant spike not only here but in other grades such as Brent.

Natural Gas Outlook

The natural gas markets are flat on their back as we are sitting just above the $3 level and that has some retail traders confused because number one, this is a US contract, but number two, the $3 level offers a bit of a floor. While it is cold out, we are trading the March contract and that means we are starting to look towards spring.

There is a very real world in which we get another spike between now and rolling over into actual spring and that probably causes your next pop higher. I would not anticipate that we would get anywhere near the previous highs. I think a really strong push here could send natural gas to $4.50, but we need the weather to make that happen. Until then, this is pretty much dead money, but watch your weather reports in places like Boston, New York, Philadelphia, Pittsburgh, etc., because if we do get another Arctic blast, we could very well see natural gas jump a bit, but this would be a short-term trade at best. Later in the next couple of months, if we can find ourselves closer to $4.50 or even $5, it becomes a market that you short. This time of year, you never do that.

 

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