Chaos in global oil markets continues

Oil, fundamental analysis

The geopolitical situations being monitored a week ago were still front-and-center this week in regard to crude markets. US President Trump’s threat of military intervention in Iran and his quick reversal created a Hi/Lo spread in prices of almost $4.00/bbl. The sale of the first tranche of Venezuelan crude along with large builds in oil and gasoline stocks added a bearish sentiment. However, February futures managed to breach the key $60.00/bbl mark and shoot through the Upper-Bollinger Band level before retreating later in the week.

WTI’s weekly high of $62.36/bbl occurred Wednesday while the low of $58.45 was on Monday. Brent followed a similar pattern with its high of $66.80/bbl on Wednesday and its weekly low of $62.75 on Monday. Both grades settled much higher week-on-week. The WTI/Brent spread has widened to ($4.75).

Pres. Trump threatened the Iranian government that the US would step in should the killing of protestors there continued which caused the early week rally in crude. Should this have happened, the primary concern would be any blocking of the Strait of Hormuz through which oil from Iran, Iraq, Kuwait, UAE, and Qatar flows. Pres. Trump would later declare that he had been assured the killings had stopped and retreated from his threats for now thus, lowering the geopolitical risk premium in oil pricing. The situation remains uncertain while the US military works on the best strategy if we go in. This wouldnt' be the cake walk that took place in Venezuela.

The Russia/Ukraine war remains with attacks occurring on both sides. Russian officials announced agreement with Trump who blames the lack of progress in peace talks on Ukranian Pres. Zelenskyy.

Other than the US receiving tankers of oil from Venezuela, there has not been much movement on how to restore and improve the country’s oil industry as US oil executives were less than enthusiastic about the venture during last week’s White House meeting. Besides some level of assurance from the US government that new assets will not be confiscated, sub-$60 oil is a major disincentive.

The Energy Information Administration (EIA) is forecasting oil prices to average $55.87/bbl this year and $54.02 for 2027. Lower oil prices are leading to downward revisions for 2026 capital expenditures by US exploration and production companies with independent Continental Resources being the latest to announce a halt in drilling in the Bakken shale in North Dakota. Meanwhile, OPEC is already estimating oil demand for 2027 and foresees a growth of 1.4 million b/d. 

The EIA's Weekly Petroleum Status Report indicated that commercial crude oil inventories for last week unexpectedly increased while production held steady. The Strategic Petroleum Reserve was up 200,000 bbl to 413.7 million bbl.

Food prices in December rose +3.1%, which was the fastest rate in 3 years. Meanwhile, inflation held at +2.7% vs. December 2024 but was above expectations for a +2.6% reading. Core inflation was +2.6%. Jobless claims fell last week to just under 200,000 at 198,000 which is considered low. Sales of existing homes rose +5.1% last month. AI-related shares rose this week on Trump’s proposed +25% tariff increase on computer chip imports. However, all 3 major US stock indexes are lower this week than last week. The USD is higher which may be adding pressure on oil prices.

Oil, technical analysis

February 2026 WTI NYMEX futures shot through their 8-, 10-, and 20-day Moving Averages on this week’s rally,  reached the Upper-Bollinger Band Limit and later fell back below those levels to around the 8-day MA. Volume is falling as contract expiration is next week and traders turn their attention to March. The Relative Strength Indicator (RSI), a momentum indicator, is moving out of neutral territory at 54. Resistance is now pegged at $60.00 while near-term critical Support is $58.65 (13-day MA).  

Looking ahead

Don’t look for any major change in the Russia/Ukraine situation especially given Trump’s invasion of Venezuela while eyeing Greenland will give Putin pause to make any concessions in his conquest of Ukraine. There has been no information out of Iran confirming that the killings just suddenly stopped. The protests have not ceased, leaving the possibility of the government there continuing the punishments. The Trump administration’s emphatic desire to take over Greenland has led to US allies such as Denmark, France, and Germany considering moving troops there, further complication an already volatile geopolitical environment. Late January forecasts look bullish for heating oil demand as cold covers the entire demand region.

Natural gas, fundamental analysis

Natural gas futures have been in a downtrend since the first week of December despite one weekly rally. Sustained cold has not emerged yet and storage volumes are above-normal for this time of year.

The week’s High was $3.50/MMbtu on Tuesday while the week’s Low was $3.02 on Friday. Global demand for LNG increased this past week as 33 tankers comprising 127 bcf left the US Gulf Coast. A cold snap in Europe and Asia has raised consumption considerably. In the UK, natural gas prices at the NBP were most recently much higher at  $13.20/MMbtu while Dutch TTF futures were $12.55 as EU storage levels have slipped to 52%. Asia’s JKM was quoted at $11.15/MMbtu. The EIA’s Weekly Natural Gas Storage Report indicated a withdrawal of 71 bcf vs. last year’s withdraw of 227 bcf and a forecast of -87 bcf and a 5-year average of -146 bcf. Total gas in storage is now 3.185 tcf, now at 1.0% above last year and 3.4% above the 5-year average.

Natural gas, technical analysis

February 2026 NYMEX Henry Hub Natural Gas futures have now fallen back below the 8-, 13-, and 20-day Moving Averages this week and have touched on the Lower-Bollinger Band Limit, a buy signal. Volume was below average at 130,000. The RSI has moved into oversold territory at 35 on the late week sell-off. Support is $3.00 (Lower-Bollinger Band)  with key Resistance at $3.29 (8-day MA).

Looking ahead

Look for a technical reversal as oversold is clearly flashing. As with heating oil, the 8-14-day forecast also looks bullish for natural gas demand. Last week’s storage withdrawal was seasonally low, and we now sit at a surplus to both last year and the 5-year average. Traders have bee pointed to late-January cold for weeks now. If it does not emerge, look for March to slip as well as the re-injection months of April and May.