What to Know

  • Natural gas attempted to rebound as traders assessed the EIA Weekly Natural Gas Storage Report.
  • Working gas in storage increased by +40 Bcf from the previous week, above analyst consensus of +31 Bcf.
  • Natural gas stocks are -79 Bcf below last year and +148 Bcf above the five-year average for this time of year.
  • WTI oil surged as traders reacted to Houthis defeating Yemen’s government forces in Mokha, a key Red Sea port.
  • Control of Mokha could improve Houthis’ position to threaten vessels moving through the Bab-el-Mandeb Strait.
  • Crude inventories declined by -0.4 million barrels, compared with expectations for a -1.6 million-barrel draw.
  • Gasoline inventories rose by +1.3 million barrels, while distillate fuel inventories increased by +2.1 million barrels.
  • The Strategic Petroleum Reserve declined from 286.6 million barrels to 285.4 million barrels.
  • U.S. domestic oil production increased from 13.862 million to 13.947 million.
  • Brent oil moved above the $107.00 level as traders focused on potential Middle East supply disruptions.

Oil Markets Reprice Middle East Shipping Risk

Oil prices rallied strongly as traders reassessed the risk premium attached to Middle East supply routes. The latest move was driven by the Houthis’ advance in Yemen and their defeat of Yemen’s government forces in Mokha, a key port on the Red Sea. For energy markets, the development matters because Mokha sits near maritime routes connected to the Bab-el-Mandeb Strait, a critical passage for vessels moving between the Red Sea and broader global trade lanes.

Market participants are now focused on whether the Houthis could use control of the area to threaten shipping through the Bab-el-Mandeb Strait. The possibility of vessel attacks has added urgency to the rally, especially as there are no signs that the U.S. and Iran are ready to return to negotiations. Because Houthis are supported by Iran, some traders are considering the possibility that pressure on regional shipping could become part of a broader geopolitical strategy aimed at Saudi Arabia and global energy prices.

The concern is amplified by the fact that key regional export routes are already viewed as vulnerable. With the Strait of Hormuz and the Bab-el-Mandeb Strait both connected to Saudi Arabia’s opponents in the current market narrative, traders are factoring in the risk that normal logistics could become much more complicated. Saudi Arabia may have the option of using the Suez Canal, but market participants widely view that as a difficult logistical workaround rather than a clean substitute for existing export routes.

WTI Oil Tests Fresh Highs as Traders Watch $103

WTI oil soared as geopolitical risk became the dominant driver of short-term sentiment. The market is currently trying to settle above the resistance zone at $102.50 to $103.00. A sustained move above that area would point to the next resistance region at $109.50 to $110.00, according to technical traders monitoring the daily setup.

The rally has pushed momentum indicators into stretched territory. RSI is in the overbought zone, which would usually encourage caution among short-term traders. However, technical factors may take a back seat while the market remains focused on geopolitical developments. In periods of heightened supply risk, oil can continue to move aggressively even when standard momentum readings suggest that prices have climbed too far, too fast.

The EIA Weekly Petroleum Status Report added another layer to the market debate. Crude inventories declined by -0.4 million barrels, while analysts had expected a larger draw of -1.6 million barrels. On its own, that smaller-than-expected decline might have limited upside momentum. Instead, traders placed greater emphasis on the possibility of supply interruptions tied to the Red Sea and broader Middle East tensions.

Product inventory data were also notable. Gasoline inventories increased by +1.3 million barrels, compared with analyst consensus for a -1.4 million-barrel decline. Distillate fuel inventories rose by +2.1 million barrels from the previous week. These figures suggest that the physical market is not uniformly tight across every category, yet the geopolitical risk premium outweighed softer inventory details in the latest session.

Strategic Reserves and U.S. Output Remain in Focus

Traders also monitored changes in the Strategic Petroleum Reserve and domestic production. The Strategic Petroleum Reserve declined from 286.6 million barrels to 285.4 million barrels as the U.S. continued to sell oil from strategic reserves. In a high-price environment, reserve policy remains an important market variable because it can influence perceptions of available emergency supply.

Domestic oil production increased from 13.862 million to 13.947 million as oil companies reacted to elevated prices. Rising production can help offset some supply concerns over time, but near-term price action is still being shaped by the risk that maritime disruptions could affect flows before additional production fully changes the market balance. For traders, the key question is whether U.S. output growth can calm a market that is increasingly focused on shipping chokepoints.

The tension between inventory data and geopolitical risk explains why oil prices remained firm despite several statistics that might normally be considered less bullish. A smaller crude draw, higher gasoline inventories, and higher distillate inventories would often weigh on sentiment. In this case, however, the possible disruption of export routes carried more weight than weekly stock changes.

Brent Oil Climbs Above $107 as Supply Risk Builds

Brent oil rallied above the $107.00 level as traders focused on additional risks to oil supply in the Middle East. The international benchmark is especially sensitive to disruptions in global seaborne flows, making the Bab-el-Mandeb Strait and Strait of Hormuz central to current market psychology. Traders are considering a scenario in which the Strait of Hormuz may remain closed for several months while Houthis could begin targeting vessels in the Bab-el-Mandeb Strait.

That scenario remains a market risk rather than a certainty, but it is powerful enough to support a significant risk premium. If shipping routes become unreliable or insurance and logistics costs rise sharply, energy markets could face a more difficult adjustment. Some chart watchers argue that such a backdrop could push oil prices toward historic highs, although that outcome depends on how events develop and whether diplomatic or military responses reduce the threat to shipping.

From a technical perspective, Brent oil traders are watching resistance in the $102.50 to $103.00 region and the next resistance zone at $109.50 to $110.00. The price action above $107.00 indicates that the market has already moved into an area where sentiment is highly reactive to headlines. A clean break toward the upper resistance range would likely require continued concern about Middle East supply security.

Natural Gas Attempts Recovery Despite Larger Storage Build

Natural gas attempted to rebound as traders reacted to the EIA Weekly Natural Gas Storage Report. The report showed that working gas in storage increased by +40 Bcf from the previous week, exceeding analyst consensus of +31 Bcf. A larger-than-expected build is typically bearish because it indicates more supply in storage than traders anticipated. Interestingly, the data did not put material pressure on natural gas markets during the session.

At current levels, stocks are -79 Bcf below last year and +148 Bcf above the five-year average for this time of year. This mixed storage picture helps explain the market’s cautious reaction. On one hand, inventories are higher than the five-year average, which can limit bullish enthusiasm. On the other hand, stocks remain below last year’s level, leaving room for traders to debate whether current pricing already reflects the storage situation.

Technical traders are watching whether natural gas can settle back above the $2.80 level. If that happens, the market could move toward the 50 MA at $2.91. A move above the 50 MA would open the way to a test of resistance at $3.00 to $3.05. These levels are important because they help define whether the attempted rebound is merely a short-term bounce or the start of a broader recovery attempt.

On the downside, a successful test of support at $2.75 to $2.80 would put pressure on natural gas and could push prices toward the next support zone at $2.60 to $2.65. RSI remains in moderate territory, suggesting there is room for momentum to build in either direction. Unlike oil, where geopolitical risk is driving a powerful repricing, natural gas is currently more focused on storage, technical levels, and near-term trading momentum.

Technical Levels Matter, but Headlines Dominate Oil

The difference between natural gas and oil is especially clear in the current setup. Natural gas is responding to storage data and technical levels, while WTI and Brent are being driven by geopolitical risk. For oil traders, the question is less about a single inventory report and more about whether Middle East shipping routes remain secure. That makes the market vulnerable to sharp moves in both directions as new information emerges.

If tensions around the Bab-el-Mandeb Strait escalate, oil prices could remain supported even if weekly inventory data are not especially bullish. If the perceived shipping threat fades, overbought technical conditions in WTI could become more important, and traders may reassess whether the rally moved too far. For now, the market’s focus remains firmly on supply security, vessel risk, and the potential for pressure on Saudi export logistics.

Natural gas faces a different challenge. The larger-than-expected storage build did not trigger heavy selling, but the market still needs a sustained move above key resistance to attract stronger bullish momentum. Until that happens, traders may continue to treat rallies cautiously, especially with stocks sitting above the five-year average for this time of year.

Frequently Asked Questions (FAQs)

Why did WTI oil rally so sharply?

WTI oil rallied as traders reacted to the Houthis’ defeat of Yemen’s government forces in Mokha, a key Red Sea port. The move raised concerns that vessels moving through the Bab-el-Mandeb Strait could face higher risk.

Why is Mokha important for oil markets?

Mokha is important because its location on the Red Sea gives the Houthis a stronger position near shipping routes connected to the Bab-el-Mandeb Strait. Traders worry that threats to this route could complicate oil transport and increase supply risk.

What resistance levels are traders watching for WTI oil?

WTI oil is trying to settle above resistance at $102.50 to $103.00. If that move succeeds, technical traders are watching the next resistance area at $109.50 to $110.00.

Why did Brent oil move above $107.00?

Brent oil moved above the $107.00 level as traders priced in additional risks to oil supply in the Middle East. The market is especially focused on the possibility of disruptions around the Strait of Hormuz and the Bab-el-Mandeb Strait.

What did the EIA crude inventory data show?

The EIA Weekly Petroleum Status Report showed that crude inventories declined by -0.4 million barrels, compared with analyst expectations for a -1.6 million-barrel draw.

How did gasoline and distillate inventories change?

Gasoline inventories increased by +1.3 million barrels, while distillate fuel inventories rose by +2.1 million barrels from the previous week.

Why did natural gas try to rebound after a bearish storage number?

Natural gas attempted to rebound even though working gas in storage rose by +40 Bcf, above analyst consensus of +31 Bcf. Traders appeared to focus on the broader storage picture and technical levels rather than treating the larger build as a decisive bearish catalyst.

What levels matter most for natural gas now?

Natural gas needs to settle back above $2.80 to target the 50 MA at $2.91, followed by resistance at $3.00 to $3.05. On the downside, support at $2.75 to $2.80 and then $2.60 to $2.65 remains important.