WTI Crude Oil

The WTI Crude Oil markets fell on Monday as the market is starting to run out of steam. The $38 level seems to be rather resistive, and it seems to extend all the way to at least the $40 handle above. Remember, US shale oil producers have suggested that they will flood the markets and the $40 level with supply, and at this point in time markets are oversupplied to say the least. Storage facilities in Cushing, Oklahoma are overflowing with excess oil at the moment, so quite frankly this rally is a bit premature, regardless of what the Saudi Arabian and Russian governments have been saying. The reality is that OPEC no longer has control over the market like it once did, as the United States and Canada both have large amounts of oil in the ground.

Natural Gas

Natural gas markets initially fell on Monday but found enough support below the $1.80 level to turn things around and form a hammer. That hammer of course is a bullish sign, and if we can break the top of that I think that we will then try to reach towards the $1.90 level, and then eventually the $2.00 level, which of course is a large, round, psychologically significant number. I think it’s only a matter of time before the sellers step back into this market though, so any long position at this point in time would have to be short-term at best. I would have to be very quick to stop loss orders to the breakeven point.

On the other hand, we break the bottom of the hammer, that would of course be very negative especially considering the fact that it goes with the longer-term downtrend which should continue as the supply for natural gas is very strong, despite the fact that several American drillers have stopped producing due to the fact that they are taking losses.