Natural Gas and Oil Forecast: Saudi Exports Recover as Hormuz Risks Persist

Oil markets became better balanced on Monday, as there were signs that oil shipments out of the Middle East are not going to fall abruptly.

Still, there are many uncertainties, and oil markets are still considered to be very nervous.

One of the main reasons for the market balance was the news that even though parts of the pipeline carrying Saudi Arabian oil across the country had been damaged, Saudi Arabia was still able to restore oil shipments, and is currently exporting more than 4 million barrels a day.

This is a big increase from August, where the exports had dropped to about 2.4 million barrels a day.

Although exports have increased, the amount of tanker traffic through the Strait of Hormuz has been very low.

Only 12 tankers were seen traveling through the strait this past week.

There are also many oil tankers that are not broadcasting their locations, so there may be a lot of oil being transported that is not showing up on satellite.

According to some estimates, about 34 million barrels of oil were transported through the strait last week.

The costly workaround is being implemented by Gulf producers.

Shuttle tankers and ship-to-ship transfers have increased, especially near Oman.

Reuters has reported that the flows through the Strait of Hormuz have recovered to around 6.5 million barrels per day.

However, logistics costs on certain routes have reportedly reached as high as $30 per barrel.

With little to no progress on negotiations, the focus is on the U.N. meetings this week to gauge any potential breakthroughs.

Rising diplomatic efforts have lessened some geopolitical concerns.

Natural Gas is expected to remain tight.

QatarEnergy has stated its LNG output is a “very minute” volume.

Without the resolution to the Hormuz situation, Qatar could further restrict LNG output and in turn delay the country’s infrastructure and LNG expansion projects.

With oil and LNG remains firmly tight, the US is expected to increase exports.

Fundamental bias: USOIL neutral-to-bullish, UKOil neutral-to-bullish, Natural Gas bullish.

Currently, natural gas is trading at $2.88 and is holding support at $2.84.

Price action has been capped at $2.91, along with the moving averages, and is currently under the $2.91 resistance level.

This creates a near-term sideways range, with higher probabilities for a break below the range.

If sellers gain control, near-term support is expected at $2.84.

Below that, additional support is expected at $2.81, $2.78, and $2.75.

The RSI is neutral, and centered over the 50 average, suggesting the market is range-bound.

Natural gas is expected to remain range-bound, with a slight bias to the downside.

A break above the range would put the new range top at $2.95, and ultimately $2.99.

A break below the range is expected to put support at $2.81 and $2.78.

As of writing, WTI crude oil is quoted at about $93.93.

What I find noteworthy in this 1-hour chart is that price recently broke support at $94.76, and is currently under both of the moving averages.

Price has also failed to make a new high above the $106.80 level, which tells me the current selling momentum is still elevated.

Currently, I’m looking for support at $91.73.

A breakdown below there would allow price to challenge support at $88.68.