Oil and Gas: Bearish Trends to Continue

NEW YORK (TheStreet) -- Crude oil and natural gas could extend losses this week on bearish technical indicators, escalating inventories and moderate economic data.

A host of economic releases are expected to pressure oil prices. The eurozone manufacturing index is expected to decline, which could weaken the euro, countering any gains in oil prices. The Richmond Fed manufacturing index is expected to fall, thereby exerting a negative impact on oil prices. However, durable goods order data for the U.S. are likely to increase, which could cap major price declines. For the second quarter, the U.S. annualized GDP is expected lower, which could have a negative impact on oil prices.

Refinery utilization increased last week after the maintenance period, which could inflate inventory levels in the current week. Thus, rising supply and lower demand will have a negative impact on crude prices.

Crude futures for September delivery ended the week at $74.54, down 1.27%, after reaching $77.03 during the week. Momentum indicator weekly RSI (14) is at 0.45. Crude is trading below major trend line support and may retreat further. As per Fibonacci principle, crude prices tested the $74 levels (nearly 38.1% of retracement of 81.76-72.99 move). If prices breach and sustain below $72.99 levels, the plunge could be sharp.

Natural gas prices are expected to be bearish, hit by the turndown in demand due to normal weather. August temperatures in the eastern and Midwest U.S. will be normal, as forecast by the National Weather Service.

The buildup in inventory levels was 27 billion cubic feet (Bcf) last week, setting the stage for steeper losses in gas prices. Meanwhile, lower natural gas rig counts may cap sharp declines in prices.

Natural gas September prices ended 4.5% lower last week, to finally settle at $4.117. Gas prices witnessed a high of $4.375 and a low of $4.109 last week. However, prices were seen consolidating over the past 12 weeks and major trend line support is at $4.260 levels. The weekly candlestick pattern for natural gas indicates lower prices in the upcoming weeks, with resistance seen at 4.180 and 4.260 levels. Gas is trading below the long-term and short-term EMA (9, 18, and 45 days) potential, suggesting a bearish trend.

Recap of Last Week

Crude oil futures contracts traded bearish last week. Oil prices tumbled to two-month lows on oversupply and global economic concerns. West Texas Intermediate for September delivery ended the week at $73.36 per barrel on the NYMEX.