Crude Oil Forecast: Major Resistance at $54.5

Early Monday, crude oil prices were bolstered again after an announcement made by non-OPEC producers to cut 558,000 barrels per day. This comes after a commitment by OPEC to cut 1.2 million barrels per day. Reports indicate that such cuts will help to rebalance supply and demand by the first half of 2017. However, many market insiders remain skeptical that OPEC and other major producers such as Russia will stick to their agreements and quotas in coming months.

From a technical standpoint, January WTI gapped higher on Monday and met the 0.618 projection of the wave $34.55 – 53.72 – 42.43 at $54.51. This is an extremely important target. Waves that meet the 0.618 projection generally extend to their 1.00 projection, in this case, $61.6. It would likely take weeks, if not months, to reach $61.6. However, upon a sustained close over $54.5, the outlook for WTI would become much more bullish.

WTI Crude Oil

Due to the importance of $54.5, a correction is expected before prices rise much higher. So far, prices have fallen to $52.18 and formed a shooting star pattern on the daily chart. This is negative for the near-term and indicates the gap from $51.66 will most likely be filled within the next day or so.

A close below $51.66 would call for $50.1. This was resilient support last week and is the midpoint of December 1. For now, it looks as though prices will try and hold above $50.1 and will likely settle into a trading range between $50.1 and $54.5.

A close below $50.1 would open the way for $48.7 and $47.4. The lower of these two targets is most important support because it is the 62 percent retracement of the move up from $42.95 to $54.51. A sustained close below $47.4 is doubtful in the near-term but would be a strong indication that the move up is over.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Crude Oil rose substantially last week after OPEC agreed to cut output by 1.2 million barrels per day. The week posted the largest percentage gain since 2009 and many market participants reportedly expect the move up to continue.

However, others remain skeptical that OPEC members will comply with production quotas. Members have been known to cheat quotas in the past per media sources. In addition, pundits say higher prices would likely encourage more shale production in the U.S., which would ultimately offset OPEC cuts.

Most long-term technical factors are positive. However, WTI is starting to show signs of weakness for the near-term. January WTI’s move up stalled at $52.42 before prices could overcome the mid-October double top at $52.7. To reach the next target at $53.6 soon, January must overcome $52.7 early this week.

WTI Crude Oil

That said, the KaseCD momentum indicator is set up for bearish divergence and several momentum indicators confirmed bearish divergences on intra-day charts. Therefore, the correction from $52.42 will most likely extend to last Thursday’s $50.1 midpoint first. A close below $50.1 would then call for $49.5, which is the 38 percent retracement of the move up from $44.82 to $52.42.

Key support for the near-term is $49.1. A close below this would be a strong indication that without more help from external factors, the move up is over, for now.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Natural gas’s recovery from recent lows is reportedly due to forecasts for cooler temperatures that could bring more demand in coming weeks. In addition, prices were bolstered on Wednesday due to a surprise two Bcf withdrawal reported in the EIA Natural Gas Storage Report. However, some analysts have cited record storage levels could still ultimately be bearish for the longer-term.

On Monday, December natural gas formed a potential bullish breakaway gap from $2.852. Bullish breakaway gaps occur when a move down becomes exhausted and prices break higher out of a recent trading range. This is a reversal pattern that could indicate the move down is over, for now.

December Natural Gas

In addition, the 200-day moving average was overcome on Wednesday when December settled at $3.026. This is also bullish and indicates, at a minimum, that an extended upward correction to challenge recent swing highs is likely underway.

The wave formation up from $2.546 met important resistance at $3.062 on Wednesday. A small correction might take place first, but the wave formations are poised for $3.17. This is key resistance because it is in line with the $3.163 swing high, which is also crucial on the continuation chart. It is also the 62 percent retracement of the decline from $3.556 to $2.546. A move above $3.17 ($3.31 for January) is doubtful without help from external factors (i.e. cold weather) but would open the way for new 2016 highs.

That said, December may still try to fill the gap from $2.852. Look for initial support at $2.95 and key support at $2.85. The $2.85 level is not only in line with the gap, but also the 38 percent retracement of the move up from $2.546.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary and intra-week updates provide a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

The rise in crude oil prices last week was reportedly due to increased hopes that major producers will reach an agreement to cut production. However, others’ skepticism about such a cut, the surging U.S. dollar, and a surprisingly large increase in U.S. oil supplies are said to have kept a lid on the move up so far.

On Monday, January WTI settled above the 50 percent retracement of the decline from $52.74 to $42.95 and the 0.618 projection of the wave $42.95 – 47.12 – 45.18. January also settled above the midpoint of the week ended November 4. In addition, KaseX, which uses a combination of Kase StatWare signals, triggered a buy signal (green triangle).

January WTI Crude Oil

The move up is now in position to challenge key resistance at $49.1. This confluence point is near the 62 percent retracement of the decline and the 1.00 projection of the wave up from $42.95. It is also just above the open for the week ended November 4.

The confluence and importance of resistance around $49.1 make it a potential stalling point. However, a sustained close over $49.1 would indicate a more substantial correction and potential recovery to challenge recent highs is underway.

Initial support is near Monday’s $47.5 midpoint and the 21 percent retracement of the move up from $42.95. This level should hold. Key support for the next few days will be $46.5. This is near Monday’s open and the 38 percent retracement. A close below $46.5 would indicate the corrective move up is over and that another test of major support is about to take place.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Crude oil prices continue to decline. Reports indicate the primary culprit is waning expectations for a meaningful OPEC output cut. In addition, some see record level production from countries like Russia and Canada as an equalizer to any cuts that may be made. There is also added uncertainty as US president-elect Donald Trump has pledged to loosen US drilling restrictions, which could boost domestic output next year.

Most technical factors are also negative. December WTI crude oil is poised to challenge the $41.58 swing low made August 3. This is in line with the 62 percent retracement of the move up from $34.06 to $53.62. Key support is $40.0, the 1.00 projection of the wave $53.62 – 41.58 – 52.22. A close below $41.6 would call for a long-term bearish outlook. A close below $40.0 would open the way for potentially $35.6 and lower.

crude oil daily candlesticks

That said, on Monday the move down stalled at $42.2 and formed a bullish hammer. This is a reversal pattern setup that indicates the upward correction may extend first. The hammer’s completion point is $43.9 and the confirmation point is $44.4.

A close over $44.4 would call for a more substantial correction to $46.0. This is crucial resistance for the near-term because it is the 38 percent retracement of the decline from $52.22 to $42.2. Without a bullish shift in underlying factors, it is doubtful that $46.0 will be overcome.

This is a brief analysis and outlook for the next day or so (in this case, a bit longer). Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Natural gas has fallen hard ahead of November’s expiration. Speculation that natural gas storage could reach record levels ahead of winter and warmer than normal weather forecasts for the next few weeks are reportedly reasons for falling prices.

Prompt month November futures fell to $2.627 on Wednesday where the 62 percent retracement of the move up from $2.168 to $3.366 was met. Prices rallied into the close and November settled at $2.731. This setup a daily morning star and hammer, which indicates prices may rise to $2.82 and even $2.88 before November expires on Thursday.

The negative outlook has also spilled over into the December contract, which fell below the crucial $3.01 swing low on Wednesday. This was negative because the move below $3.01 takes out what had been December’s primary up wave, $2.37 – 3.368 – 3.01. This significantly dampens the odds for a near-term recovery and a move to new highs.

December natural gas chart

The outlook is negative and there are no definitive technical factors that indicate the move down is over. However, the daily chart is oversold on the KaseCD and setup for a KCDpeak (bullish turn signal). In addition, the 200-day moving average at $2.99 held on a closing basis. These factors and the rally from $2.972 to $3.083 indicate an upward correction to at least $3.13 should take place Thursday. From that point, the move down may continue, or at least test $2.99 again. A close over $3.13 would call for a larger correction to $3.20 and possibly $3.26. This would also indicate a trading range is likely on the horizon.

The 200-day average at $2.99 will be December’s crucial support on Thursday. A close below this would solidify the negative outlook and open the way for $2.93 and lower. Below $2.99, the next major target is $2.82. This is the 62 percent retracement from $2.37 to $3.556.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary and intra-week updates provide a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

Natural gas was spurred higher last Thursday after government data showed a smaller than expected build for the week ended October 7. However, the move’s strength and resilience reportedly came as a surprise for many market participants due to mild weather across most of the U.S. The market remains well supplied according to many analysts and rig counts have begun to climb. The natural gas rig count expanded by 11 last week, which is the largest increase since late 2014.

This week, November natural gas prices have fallen to $3.144 so far and settled below major support at $3.21 on Wednesday. The move down stalled just before reaching the next target at $3.12.

The subsequent move up from $3.144 has been shallow, choppy, and is forming a bearish flag. Bearish flags are reasonably reliable patterns that indicate the market should continue to decline. The lower trend line of the flag is $3.15 and the upper trend line is $3.21. The $3.21 level may be tested first but should hold because odds favor a break lower out of the flag.

November 2016 Natural Gas - $0.035 Kase Bar

Tomorrow, look for prices to break lower out of the flag and fall to at least $3.12. A close below this would call for $3.06. For the move up to continue in the near-term, $3.06 must hold. This is the 62 percent retracement of the move up from $2.866 to $3.366. A close below $3.06 would shift odds in favor of testing the $2.866 swing low.

Conversely, a break higher out of the flag and close over $3.21 would call for $3.27 and $3.32. A move above $3.32 would take out the wave down from $3.366 that projects to $3.06 and lower.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary and intra-week updates provide a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

Last week, after WTI crude oil surged higher on Monday, prices eased a bit and an overdue correction started. Media sources indicate prices fell due to concern about persistent oversupply. Traders are reportedly waiting for new bullish news to push prices higher. In addition, skeptics remain doubtful that OPEC will be able to follow through on last month’s proposed production cut.

Technical factors show that the correction should extend to at least $49.1. This is because the wave $52.16 – 49.79 – 51.51 met its 0.618 projection at $49.9. Waves that meet the 0.618 projection typically extend to the 1.00 projection, in this case $49.2. This is also near the 38 percent retracement of the move up from $43.77. The confluence point is $49.1.

clz6-20161017

That said, the correction may be forming a bullish descending triangle. The upper trend line of the formation is $51.1. The move up late today indicates WTI might test this upper trend line before the downward correction continues.

A close over $51.1 would call for the $51.51 swing high to be overcome. This would, in turn, take out the wave down from $52.16 that projects to $49.0 and lower. Therefore, for the move down to continue as expected $51.1 should hold and the $51.51 swing high must hold.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Media sources state that traders and analysts are looking to current warm weather in the south and anticipation of a colder than normal winter as catalysts for higher natural gas prices. However, some reports indicate many traders and analysts remain skeptical and have stated that the move up is too soon in anticipation of real weather. These traders and analysts are concerned that an early move higher may lead to disappointment due to inventories that could exceed record levels by the end of this month.

Natural gas’s move up has been resilient and reflects the market’s desire for a longer-term bullish move. The bullish sentiment was reflected by the move to $3.30 on Monday. However, this was a highly confluent wave projection that has held and November has pulled back to $3.184 so far.

From a technical standpoint, there is little doubt that the move down is corrective. The decline has been shallow and choppy and may form a bullish expanding wedge. However, today’s close below Monday’s midpoint and the waves down from $3.30 call for the correction to extend at least a bit more before the move up continues.

ngx6-20161012

Support at $3.18 is still important. A move below $3.18 would call for at least $3.14, which is a confluent wave projection and retracement level. A close below $3.14 would open the way for a more significant correction before prices rise to a new 2016 high.

Resistance at $3.27 must hold for the correction to extend to $3.14. A move above $3.27 before $3.14 is met would indicate the correction is complete and call for prices to rise to crucial targets above $3.30.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary and intra-week updates provide a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

November natural gas has shown signs of strength over the past few days. November held support near $2.90 and on Tuesday completed a daily hammer when prices settled above $2.94. A bullish RSI divergence was confirmed at $2.866 on several intra-day charts. On Wednesday, the move up rallied to a very important $3.05 target ahead of the close. Finally, as of Wednesday, the weekly candlestick forms a bullish engulfing line.

These positive factors indicate the move up should continue to $3.09, $3.12, and possibly $3.18 over the next few days. A move to these targets would also take out the crucial $3.079 swing high. This would significantly dampen the odds for a continued decline to targets below $2.90.

ngx6-20161005

That said, $3.05 is a potential stalling point. This is because $3.05 is the 62 percent retracement of the decline from $3.166 to $2.866 and the 1.00 projection of the wave $2.866 – 2.99 – 2.922. There are no definitive factors that indicate the move will stall at $3.05, but caution is warranted.

Should prices pullback from $3.05, support at $2.98 should hold. The key level for the near-term is $2.94. This is the 62 percent retracement of the move up from $2.866 to $3.058. A close below $2.94 would call for another test of the $2.866 swing low and most likely signal that a trading range is forming.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary and intra-week updates provide a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.