Natural Gas and Oil Forecast: WTI Eyes $84.75 as Brent Targets $91.15

OPEC production increased sharply in July as Gulf producers restored output, according to the Reuters survey cited in the article.

OPEC+ has approved another 188,000 bpd increase for September as it continues unwinding voluntary production cuts.

Strait of Hormuz shipping remains heavily constrained, limiting the impact of recovering Gulf production on global supply.

WTI's trendline breakout puts $84.74 in focus, with bullish momentum intact while price holds above $81.92.

Brent has also broken its descending trendline, bringing $91.13 into focus as the next major resistance.

Oil fundamentals continue to be primarily dominated by the Middle East as hopes for a U.S.-Iran agreement have dimmed.

Constant delays and a severe lack of shipping through the Strait of Hormuz continue to be an issue. Only 6 ships were recorded transiting Hormuz on Monday compared to the 10-day average of 11 and a volume of 130-140 ships a day prior to the conflict.

Saudi Aramco has delayed the restarting of the Jazan refinery following the Houthi attacks, while ADNOC has opted to continue using tenders with other methods of supply to offset the gaps.

According to a Reuters survey published on August 10, OPEC has increased its output by 1.17 million barrels per day in July, with the new total standing at 19.85 million barrels per day, and led by Kuwait and Iraq as Gulf producers restored their output post-war. Output however, has been significantly below quotas.

Separately, OPEC+ has approved an increase in production of 188,000 barrels per day for September, completing the scheduled unwinding of a layer of voluntary cuts, with its next scheduled review being on the 6th of September.

The disruption is most impactful for natural gas. ADNOC Gas reported a 52% decline in profits for Q2 2022 compared to Q2 2021 and in total a decline of $665 million, attributed to the closure of the Strait of Hormuz. The company has adjusted its full year profits to $3.5-4 billion compared to US gas offers some cushioning.

EIA data reports working inventories reached 3,117 Bcf following a bigger-than-expected 33 Bcf injection, leaving storage 195 Bcf above the five-year average. In the meantime, Cheniere shipped out 184 LNG cargoes in Q2, up 19.4% from the year prior, and lifted its 2026 EBITDA range to $7.9-$8.4 billion on the strength of global LNG demand.

The EIA’s new Short-Term Energy Outlook is set to drop on August 11th, so its fresh forecasts for oil-production, LNG, and gas-demand will be the next major fundamental changes.

Natural Gas is trading at $2.78. It has broken the falling trend line and the previous resistance zone at $2.73. It is currently testing the 50 EMA at $2.79, the 100 EMA at $2.80, and a resistance zone at $2.81. The buyers are holding the zone that was previously a resistance area and have not shown any willingness to take profit. RSI has risen, and is signaling a bullish zone at $2.81, with $2.88 as the next bullish target. The recent support is set at $2.73, with additional support set at $2.66 and $2.61. In my view, if the price holds the zone at $2.73, the bullish scenario remains intact. However, a break above $2.81 would set the new bullish target at $2.88. A break below the EMA cluster would set the new target to the breakout zone.

Currently, WTI crude is trading near $83.59 after a break above the descending trendline that capped gains since the recovery in late July. Price is above both the 50-...