Crude Oil, Natural Gas: Volatility Ahead - TheStreet

NEW YORK (TheStreet) -- Crude oil and natural gas are expected to be volatile this week on updates related to tropical storm Alex, poor economic data releases and inventory buildup.

Crude oil and natural gas will likely trade higher this week on positive technical indicators. However, rising inventories of crude oil and natural gas may limit the gains during the week. In addition, the series of weak economic data, especially from the housing sector, released in the recent past showed a weakening trend in the economic recovery. Overall, crude oil and natural gas will remain highly volatile on news related to tropical storm Alex, economic data and relatively high inventories.

Technical analysis implies crude oil and natural gas will trade higher this week. During the past week, crude oil gained 0.76%, reaching a high of $79.94 per barrel to finally settle at $78.86 per barrel. As per Fibonacci principles, crude oil is witnessing resistance at the $79.93 level. The commodity is trading above 13, 22 and 45 EMA, suggesting a bullish view for the week. The momentum indicator, RSI (14) daily, has ascended from 0.20 to 0.55, implying prices have potential to move northward.

Natural gas traded lower, posting a loss of 2.79%, reaching a low of $4.727 per MMBtu and finally settling at $4.908. Natural gas is trading above 13, 22 and 45 EMA, indicating a bullish view for the week. The rebound from the recent low of $4.07 per MMBtu with rising volumes, indicate positive trading during the week. Natural gas will likely sustain above $4.687 and trade higher during the week.

Recap of Last Week

Crude Oil

gained for the fourth consecutive week in a row. Early last week, crude oil traded higher on

China's Yuan revaluation

. However, the commodity surrendered crude gains to trade lower later during the week, following a decline in existing home sales. Crude oil prices declined further after a federal judge in New Orleans lifted the ban on deepwater drilling imposed by President Obama.

A Department of Energy report released during the week showed oil and distillate inventories rising by 2.02 million barrels and 297,000 barrels, respectively, while gasoline inventories declined by 762,000 barrels. The report had a positive impact on prices, due to declining oil inventories and rising refinery utilization.

However, the gains were limited on renewed concerns related to the bailout of the Greece economy from the debt crisis. Later, Tropical storm Alex, which had the potential to disrupt oil production in the Gulf of Mexico, led to gains in crude oil prices overall.

British Petroleum

(BP) - Get Report

led the pack of oil giants declining 14.9% last week. Other majors

Exxon Mobil

(XOM) - Get Report

,

Chevron

(CVX) - Get Report

,

ConocoPhillips

(COP) - Get Report

, and

Total

(TOT) - Get Report

declined 6.3%, 7.2%, 7.3% and 5.7%, respectively.

Natural Gas

: Early last week, natural gas prices opened higher on the forecast of hot weather. However, the inability of prices to break a technical resistance was seen as an obstacle, which resulted in prices conceding the early gains and closing lower last Monday. Natural gas fluctuated during the middle of the week as weather forecasts given by different agencies varied from cooler weather to a heat wave.

EIA reports showed an increase in inventories by 81 billion cubic feet (Bcf), while market expectations stood at 80 Bcf, and the five-year average was 85 Bcf. Natural gas traded higher on the higher-than-expected buildup in inventories. U.S. natural gas inventories currently stand at 2.624 trillion cubic feet (Tcf), 13.3% above the five-year average.

Prices reached a high and low of $5.18 and $4.69, respectively, before closing the week at $4.861, with a weekly decline of 2.72%.