Market analysis

Crude oil and natural gas may turn bullish

By Stanislav Bernukhov

19 February 2024

gas and oil week 8 2024

The financial markets were notable this week due to the publication of a stronger-than-expected CPI report for the United States. In addition, yields of 30-year treasury bonds have increased to above 4.4%. These two bullish signals are now pushing the US dollar higher, pressuring Gold, EURUSD, and other currencies to new lows.

The first reaction of the markets is capital flowing to the US dollar, however, this effect probably won’t be sustainable, as traders don’t seriously consider tighter monetary policy, but rather a possible delay in interest rate decline.

After trying to break above 17, the volatility index S&P500 index VIX has declined below 15, indicating that markets are cooling down after a shocking CPI report. The Nasdaq index had also retraced off the correctional low. Among other asset classes, Crude oil looks potentially promising, as it was holding incredibly well after CPI publication, and higher inflation might boost commodity markets too, Crude oil included.

What about natural gas? The increased volatility of this asset class had led to a substantial decline of XNGUSD due to mild winter and despite strong economic numbers. It might bottom soon, as this asset approaches the beginning of the injection period in March-April of 2024.

The STEO forecast from eia.org points to a decline of stocks in storage, which is a clear seasonal pattern. The situation started not so long ago, and it may take some time to develop the imbalance between supply and demand. Now, the situation slowly starts to play on the bullish side of the market.

Crude oil

Crude oil is consolidating at around the $77 (USD) level, and should it break above the border of the chart formation displayed on the chart, it may drive higher toward the $79-80 price area. The net position of commercial traders for WTI crude oil futures stays at peaks, indicating a relatively high institutional demand, which is a factor of growth.

Natural gas

Natural gas is bottoming after a sharp drop. It’s important to mention that trying to pick the bottom might be an incredibly difficult and dangerous strategy. The bullish reversal may be sharp and furious, but a trader needs to observe a clear reversal pattern before taking a risk since timing the reversal is a challenging task.


This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.


Author:

Stanislav Bernukhov
Stanislav Bernukhov

Stanislav Bernukhov is a professional and trained trading trainer with 15 years of experience in this field. He specializes in multiple trading methods, including price action, Market auction theory, and unconventional graphical analysis.