What to Know
- Natural gas continues to trade within a relatively narrow $2.80–$3.00 range.
- The current shoulder season is limiting demand for natural gas in the U.S.
- Rising LNG exports could provide a more bullish backdrop for natural gas later in the year.
- Crude oil has recently tested its 50-day EMA.
- The $85 area is viewed as an important potential support and buying zone for WTI crude.
- Technical and geopolitical factors could create increased volatility in crude oil.
- Middle East developments and the Strait of Hormuz remain important risks for energy markets.
- A pullback toward $90–$85 could attract buyers if geopolitical tensions intensify.
Natural Gas and Light Sweet Crude
The backdrop right now, of course, is one that continues to pay close attention to the Middle East and the headlines coming out of the Middle East, as the battle around the Strait of Hormuz continues to be a major problem.
The Iranians and the Americans seemingly cannot come to some type of compromise. This week, we have speeches coming from both Donald Trump and the Iranian president at the United Nations. There have been a few hints dropped by Donald Trump that he would consider talking to the Iranian president at the United Nations, but whether or not there is any type of agreement to actually do so is a completely different story.
We've seen this movie before and, quite frankly, it always ends up the same. It ends up with no agreement. It's very likely that continues to be the way going forward, but it does have an influence on the markets at the moment.
The natural gas market has rallied just a bit
The natural gas market has rallied just a bit, but it continues to bounce around basically between $2.80 and $3. This is a market that has been trying to sort out where it wants to go, yet this is shoulder season. Shoulder season is basically the time of year where you don't have a lot of demand for air conditioning, and you don't have a lot of demand for heating.
So, we're kind of in this stagnant time of year. But it is worth noting that natural gas might behave a little bit differently this year in the United States, as there could be massive liquefied natural gas exports coming down the road. With that being the case, it could be a very bullish winter. But right now, it looks like we're basically hanging out in this 20-cent range.
Crude oil markets breathing a sigh of relief
Crude oil markets have touched the 50-day EMA. I currently believe that the $85 level would be a very interesting place to buy, assuming that we even get that far. I am willing to pay up for crude oil a little bit as soon as we get some bad headlines, and one would have to assume that's only a matter of time.
I anticipate that this will be the same as we've seen time and time again. Hope out there drives prices down for some type of resolution to the conflict, and then reality steps in as somebody in Iran says, “No, we're not agreeing to that,” or the Americans throw a missile somewhere, or everything else in between.
With this, I see quite a bit of demand between $90 and $85. We could see a bounce by the end of the week once these speeches pass by.
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