WTI crude oil (CL) continues to experience downward pressure due to heightened uncertainties in the Middle East. The ongoing conflict and its potential escalation have added layers of unpredictability to the oil market, further aggravated by the production cuts enforced by OPEC. As a result, global growth forecasts for 2024, as revised by OPEC and the IEA, paint a gloomy picture for oil demand and pricing.
These global pressures are not just confined to geopolitical tensions. Broader economic uncertainties and central bank policies are adding complexity to both energy and currency markets. The price of natural gas (NG) has also faced consistent pressure, as the uncertainty in oil has impacted energy markets as a whole.
Global Market Impact: US Dollar Strengthens Amid Crisis
The ripple effects of the Middle East crisis have extended beyond energy markets, notably impacting the US dollar index (DXY). As investors seek refuge in safe-haven assets, the demand for the US dollar has surged. This demand has resulted in the US dollar gaining strength against a basket of major currencies. The strengthening of the dollar has caused upward pressure on the DXY, making it more expensive relative to other currencies.
This flight to safety has added further volatility to global markets, with the US dollar’s performance reflecting ongoing investor concerns about geopolitical tensions and economic stability.
Federal Reserve’s Role and China’s Economic Data
Adding to the market’s complexity is the expectation of a potential rate cut from the Federal Reserve in upcoming meetings. Such speculation introduces additional uncertainty for both oil and natural gas prices, especially in light of recent deflation concerns raised by China’s CPI data.
China’s economic struggles are playing a critical role in shaping the outlook for commodity prices, particularly energy markets. Deflationary signals from one of the world’s largest oil consumers have added bearish momentum to the oil market. Meanwhile, the US dollar has broken a key resistance level, suggesting potential further gains, and upcoming retail sales data in the US could further influence the currency’s trajectory.
Technical Analysis: WTI Crude Oil and Natural Gas Bearish Outlook
From a technical standpoint, WTI crude oil has broken below key moving averages, indicating a sustained bearish trend. On the daily chart, the price action remains under pressure, with the 50 SMA crossing below the 200 SMA—a bearish signal often referred to as the “death cross.” The RSI (Relative Strength Index) has dropped below its midpoint, further confirming the market’s bearish sentiment.
Similarly, natural gas prices have shown continued bearish pressure, forming a triangle pattern on the daily chart. The price has fallen toward support levels around $2.24, with the next major support at $2.08. Should this level break, further declines toward $1.87 may be expected.
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