Crude oil looks to OPEC+ meeting for cues; is natural gas resuming its downtrend?
Crude oil is holding above tough support, keeping alive the capitulation view; natural gas has fallen sharply, but the downside could be cushioned and what are the key levels to watch?
Crude oil: Boxed in a range
Crude oil recouped some of last week’s losses as investors cheered a weekend deal in Washington to raise the government’s debt ceiling, potentially averting a disruptive government default.
Oil has managed to hold recover despite Russia’s Deputy Prime Minister Alexander Novak’s comments late last week that OPEC+ wasn’t likely to take further measures to change production levels at its meeting on June 4.
This followed Saudi Energy Minister Price Abdulaziz bin Salman warning that speculators should ‘watch out’ for pain – a sign that the group was preparing to cut output.
Crude oil monthly chart
Still, the upside in oil could be capped as the US Federal Reserve is expected to hike interest rates further at its June meeting and demand concerns given the uneven post-Covid recovery in China.
The market is pricing in a 60% chance of a 25-basis-point Fed rate hike on June 14 Vs a 17% chance a week ago and see no rate cuts until the end of the year.
Crude oil daily chart
On technical charts, crude oil’s hold above 64.00 could be a sign that oil may have capitulated following a multi-month decline.
However, there are no signs of a reversal of the downtrend yet. In this regard, oil would need to break above the April high of 83.50 for the downward pressure to fade. Until then, the path of least resistance is sideways to down.
Natural gas: Down but not out
Natural gas prices dropped sharply on Friday, before recovering slightly on Monday morning in Asia, weighed by milder US weather and a rebound in Canadian natural gas exports to the US.
Natural gas daily chart
Reports suggest the weather in the Lower 48 states would switch from cooler than normal From May 26-29 to mostly near normal from May 30 - June 10. Furthermore, earlier this month, wildfires forced Canadian producers to cut natural gas exports to the US.
However, last week, exports appear to be recovering to levels seen before the wildfires.
Still, the downside in natural gas prices could be limited by declining drilling activity on oversupply conditions and tighter credit conditions.
On technical charts, so long as natural gas stays above the February low of 1.97, some more upside can be expected, potentially toward the March high of 3.03.
Natural gas monthly chart
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.
