Energy Update: Check Out This Chart…

| June 9, 2014 | 0 Comments

Oil and Nat GasWith Summer just around the corner, now’s the perfect time to take a closer look at the energy markets. In case you’re unaware, July, August, and September are notoriously volatile months for crude and natural gas.

Let’s start with crude oil…

It has been a relatively uneventful few weeks for the oil market. As you may know, the price of West Texas Intermediate (WTI) crude tested multi-month highs at $104.50 a barrel on May 23rd.

But since then, sellers have slowly taken control, sending the commodity down to the $102 area.

Let me show you what I mean…

West Texas Intermediate

As you can see, the past week has been filled with selling. However, the latest pullback has been minor relative to the price swings seen earlier in the year. In fact, I’ll go out on a limb and say the recent downturn is merely a set up for higher prices a few months from now.

Here’s my thinking…

Notice the green lines connecting the recent highs and lows. The fact that these lines are slowly coming together to a point tells me something important…

…investors are becoming increasingly complacent and indecisive in the crude market.

While the situation may last a few more weeks, I have little doubt volatility will return to the crude market by early July.

And listen to this…

The Summer driving season is just about to shift into high gear. And that means oil demand is set to surge as drivers take to the roads. As a result, crude will likely make another Summer run to a $110- just like it did last year.

You may remember, oil shot to $111 in September 2013. Of course, much of that bullish run was the result of Middle East tension. Whether worrisome geopolitical issues show up again in coming months remains to be seen.

But purely from a technical standpoint, crude is in an uptrend and ready for higher prices!

Now for natural gas…

This gaseous commodity is currently trading near $4.70 mmBtu, which is near the top of its multi-month trading range.

Take a look…

Natural Gas

Without question, the action in natural gas has been relatively quiet for the past few months. However, with the shoulder season nearing an end, we’ll likely see volatility come back into this market as well.

As you may know, the shoulder season is the low demand period in the Spring and Fall when temperatures are palatable to consumers. But with the heat of Summer already arriving in some parts of the US, investors are keeping a close eye on EIA inventory levels.

Speaking of which…

Last week’s EIA report revealed US storage levels are still woefully short of seasonal averages. In fact, at 1,499 bcf, US inventories are still 37% below the five-year average and 33% below last year’s levels.

We’ll need a cooler than normal Summer to keep natural gas prices at current levels. If temperatures really heat up, there’s a good chance natural gas rises above $5.00 in coming months!

Until Next Time,

Justin Bennett

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Category: Crude Oil, Energy, Natural Gas

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.