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While oil rebounds, $80 is the key price level to watch for.

Time for Some Fundamental Analysis

With supply slipping and solid prospects for demand, the black gold continues to rise, notably dragged by natural gas along with it, as we may see a shift in demand from natural gas to oil. A barrel of North Sea Brent for November delivery peaked at $79.50, up 1.4% from Friday's close. After four consecutive sessions in the green, buyers are not weakening. According to Goldman Sachs, the recovery in global demand is indeed faster than expected.

On the supply side, U.S. production in the Gulf of Mexico is still cut by some 300,000 barrels per day, a month after Hurricane Ida hit, according to the latest data from the Bureau of Safety and Environmental Enforcement (BSEE). In this environment, the OPEC+ meeting next Monday should raise more attention, even though an immediate change in the cartel’s policy seems unlikely for now.

On the UK side, BP said 30% of its gas stations ran out of fuel on Sunday as a rush of panicked consumers to pumps forced the British government to suspend competition rules. According to major oil groups, a shortage of truck drivers makes it difficult to get fuel from refineries. Some operators had to implement rationing while others have closed stations.

Figure 1 – WTI Crude Oil (CLX21) Futures (November contract, daily chart)

Figure 2 – Henry Hub Natural Gas (NGX21) Futures (November contract, daily chart)

In brief, crude oil is surging. Natural gas rebounded to get back to its previous highs. I’ll assess the current moves and be waiting to see how the $80 level will act both as a psychological and technical resistance level on the Brent prior to drawing new projections. Detailed positions can be found in my premium Oil Trading Alerts. For the time being, given the increasing volatility, my conclusion is that there is too much risk to enter any trade right now.

Today's premium Oil Trading Alert includes details of our new trading position. Interested in more exclusive updates? Join our premium Oil Trading Alerts newsletter and read all the details today.

Thank you.

Sebastien Bischeri,
Oil & Gas Trading Strategist

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Knock, knock? Is it already the sky, or just a ceiling? Either way, oil has risen substantially — how high can it go?

Fundamental Updates

The crude closed on highs on Thursday thanks to optimism about demand as well as the remaining tight supply. In fact, this increase is driven by a general market sentiment that is relatively favorable to the macroeconomic situation and the conviction that supply should remain tight until the end of 2021.

The WTI crude oil futures rose 1.5% - more than $1 compared to Wednesday's close. Like Wall Street, the oil market has also been sensitive to more and more reassuring tone of messages from China about the situation of real estate developer Evergrande, which is on the verge of default. In addition, the acceleration of air travel caused by Washington lifting restrictions on entry into the United States could also boost demand for kerosene. And finally, while natural gas prices are hanging from the ceiling, we could see a shift in demand from gas to oil happening, which would obviously boost the barrel rally in Q4!

Geopolitical Scene

Thursday evening, Lebanese Hezbollah announced the arrival of a new shipment of oil from Iran to the Syrian port of Banians — the party’s television channel Al Mana reported on its Telegram account this morning. Hezbollah argues that the shipments are intended to help the Lebanese people, who are suffering severe fuel shortages due to the financial crisis the country has been experiencing for the last couple of years.

On the other hand, Lebanese Prime Minister Najib Mimait, expected at the Elysée Palace (Paris) on Friday, said that the shipments from Iran violated Lebanon's sovereignty, as both Syria and Iran are subject to US sanctions.

Figure 1 – WTI Crude Oil (CLX21) Futures (November contract, daily chart)

Figure 2 – Henry Hub Natural Gas (NGV21) Futures (October contract, daily chart, logarithmic scale)

With the black gold now attempting to pierce through its all-time highs, it will be interesting to see how oil demand will progress at those levels, as well as whether OPEC+ will face some new pressures to intervene on the supply side in the forthcoming weeks.

And… what do you think? We would like to hear from you! What’s your opinion on how high the WTI Crude could go before the end of the year? Do not hesitate to let us know!

Have a nice weekend!

Today's premium Oil Trading Alert includes details of our new trading position. Interested in more exclusive updates? Join our premium Oil Trading Alerts newsletter and read all the details today.

Thank you.

Sebastien Bischeri,
Oil & Gas Trading Strategist

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In today’s market review, we focus on the last updates impacting natural gas prices…

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