Energy Markets Test Key Support Levels as Supply Concerns Mount

Key Moments

Market Overview

Oil and natural gas prices retreated as traders weighed escalating geopolitical tensions against growing worries about oversupply. Crude benchmarks fell by more than a dollar per barrel amid expectations that between 30 and 50 million barrels of previously sanctioned oil could re-enter global flows.

A notable sign of soft physical demand emerged in the heavy crude segment, where Venezuelan barrels were reported to be trading at a steep $22 discount to Brent. This pricing gap underscored market concerns that additional supply could further strain an already fragile balance.

Analysts expressed unease that the influx of these barrels might push the market into a more pronounced surplus. Some major banks projected a potential oversupply of 3 million barrels per day by the early part of next year, reinforcing a cautious outlook.

Even though US crude inventories declined by 2.77 million barrels, fuel stocks continued to build, and prices in the Middle East moved lower. This combination kept sentiment skewed toward a cautious and slightly bearish stance across the energy complex.

Natural Gas Technical Outlook

Natural gas futures were last seen near $3.48 on the 2-hour chart, with prices attempting to firm above a clearly defined support band at $3.35-$3.38. This zone has recently acted as a floor, curbing downside momentum.

On the upside, immediate resistance sits at $3.70, followed by a higher ceiling around $3.88. A break below $3.35 would likely expose the market to a retest of $3.18, according to the stated levels.

The momentum gauge remains neutral, indicating neither a strong bullish nor bearish bias and leaving room for a modest recovery. Within this framework, the trade concept presented is to enter long positions near $3.40, aiming for a target of $3.75, with a protective stop placed below $3.30.

WTI Crude Oil Price Action

West Texas Intermediate (WTI) crude traded at $56.38 on the 2-hour chart after a sharp pullback from a firm resistance level at $58.65. The recent move lower showed strong bearish candles, but with small lower wicks forming near $55.76, hinting that selling pressure could be moderating as buyers begin to show interest.

From a technical perspective, USOIL is drawing support from the $55.76-$55.50 band, while resistance remains in place at $57.38 and $58.65. The neutral reading on the RSI suggests the market is neither overbought nor oversold, leaving scope for a potential bounce from these support levels.

Within this setup, the proposed trading idea is to buy WTI near $55.80, targeting $57.40, with a stop loss positioned just below $55.2.

Brent Crude Technical Setup

Brent crude traded just below $60.13 on the 2-hour chart after easing back toward an upward-sloping trend line that has served as support. Recent candles displayed pronounced lower wicks around the $60 area, pointing to buying interest emerging whenever prices dipped toward that zone, despite repeated attempts to push below the descending trendline around $62.20-$62.30.

Key support is identified near $59.38, with another important level at $58.72. On the topside, resistance continues to cap advances at $61.06 and $62.26.

Momentum indicators for Brent are currently neutral, suggesting consolidation rather than an immediate breakdown. Against this backdrop, the trade idea outlined is to buy near $59.8, with a target of $61.80 and a stop loss set below $58.90.