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Market update: Crude oil correction in play; natural gas’ rebound may not be over

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The downward correction in crude oil could still be in play; natural gas is approaching major support area. What is the outlook and key levels to watch for crude oil and natural gas?


original-size.webpSource: Bloomberg

 Manish Jaradi | IG Analyst, Singapore | Publication date: Monday 23 October 2023 04:59

Crude oil: correction still in force

Momentum in the most recent rebound in crude oil isn’t looking strong enough to ensure a sustainable rally just yet. The implication is that the downward correction that started toward the end of September could still be in play. Oil has recovered from near quite strong converged support, including the 89-day moving average, slightly above the 200-day moving average, and the August low of 77.50.

Earlier last month, oil pulled back from stiff converged barriers, including the Ichimoku cloud on the weekly charts and the October high of 93.00. This resistance remains crucial – a break above this barrier is needed to confirm that the rebound from June isn’t just a dead-cat bounce.

Crude oil weekly chart


original-size.webpSource: TradingView

Earlier in September, crude broke out from the multi-month sideways zone triggering a double bottom (the March and May lows), pointing to a potential rise toward 103. The 77.00-81.00 support area continues to offer a strong cushion which could limit the immediate downside, and while the support remains in place, oil could still attempt another leg higher.

Crude oil daily chart


original-size.webpSource: TradingView

Natural gas: approaches strong support

Natural gas has retreated from a stiff barrier around 3.25 (the 23.6% retracement of the November 2022-February 2023 fall). In the context of a slightly zoomed-out view, the retreat isn’t surprising given the steps forward, one step back nature of recovery since early 2023. This follows a break higher from a multi-month sideway range, a further confirmation that the long road to recovery may have started, but the damage done in 2022 could take time to unwind.

The break earlier this month above crucial resistance at the March & August highs of 3.03 triggered a significant break out from an eight-month-long sideways range, pointing to a rise to around 4.00-4.10, based on the price objective of the pattern. Importantly, for the first time since the end of 2022, natural gas has risen above the 200-day moving average and a decisive break above the 89-day moving average, suggesting that the base building may have taken place. Any break above 3.25 could open the door toward 4.20 (the 50% retracement). However, for the bullish view to remain intact, natural gas needs to stay above the August low of 2.40.

Natural gas daily chart


original-size.webpSource: TradingView




This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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