Please note that due to market volatility, some of the key levels may have already been reached and scenarios played out.

Trading positions 

• Natural Gas No new position justified on a risk/reward point of view.
• RBOB Gasoline No new position justified on a risk/reward point of view.
• WTI Crude Oil No new position justified on a risk/reward point of view.
• Brent Crude Oil No new position justified on a risk/reward point of view.

The black gold – currently trading around $110 – is hesitating between making further gains driven by tightening supplies and losing ground in a context of economic slowness.

Crude oil prices are slightly down after closing flat yesterday (May 23) as the market swings between gains and losses in a wide range, currently struggling to find direction, as the US dollar index weakened by correcting almost back onto its 50-day moving average (DMA). The greenback indeed closed yesterday below its two-week lows. Meanwhile the ECB’s chief, Christine Lagarde, was taking a rather significant hawkish tone overnight, hinting at a probable rate hike in July which would get the shared currency out of its negative interest rate territory.

US Dollar Currency Index (DXY) CFD (TradingView, daily chart)

Global economic issues

Growing fears of a global recession and an economic slowdown in China due to its strict zero-Covid policy paint a bleak picture of the demand outlook and put downward pressure on prices.

Hungary’s concerns

Hungary, which is heavily dependent on Russian oil, said it would need around 750 million euros ($800 million) in short-term investment to upgrade refineries and expand an oil pipeline transporting oil from Croatia. In the long term, it is estimated that converting the Hungarian economy to avoid Russian oil could cost up to 18 billion euros. So to convince Hungary, the European Commission last week offered up to €2 billion in support for landlocked countries in Central and Eastern Europe that do not have access to non-Russian supplies, also including countries such as Czech Republic and Slovakia.

Norwegian shortages drive UK gas prices higher

While energy prices have been rising by 9% a year in the United Kingdom – the highest rate for 40 years – gas prices in Great Britain soared due to some supply shortages from Norway, its main supplier which covers more than 60% of the UK total supplies. In fact, Norway suffered unplanned outages at its giant natural gas field, including flows through the Langeled pipeline (operated by Norwegian Gas System Manager, Gassco) that fell to 38 million cubic meters (mcm) per day due to outages.

Location of Langeled pipeline

Oil & Gas Charts

WTI Crude Oil (CLN22) Futures (July contract, daily chart)

Henry Hub Natural Gas (NGM22) Futures (June contract, daily chart)

So, what progress do you think oil will make? Will it break out of its current range and accelerate further up, while getting fuelled by geopolitics and tightening supplies? Or do you think that crude is set to drop lower? Write back and let me know.

That’s all for today, folks. Happy trading!

As always, we’ll keep you, our subscribers well informed.

Thank you.

Sebastien Bischeri
Oil & Gas Trading Strategist