Comments
Crude oil prices rallied last week and posted a second consecutive weekly gain. The Brent crude futures on the Intercontinental Exchange (ICE) was up 4.5 per cent as it ended the week at $78.3 a barrel. The MCX crude oil futures (July contract) gained 4.6 per cent as it closed at ₹6,063 per barrel on Friday.
The up move was powered by the announcement of a production cut last week by key OPEC+ states Saudi Arabia and Russia, which are also the largest producers of crude oil. Saudi Arabia extended the 1 million barrels per day (mbpd) cut, which it had announced for July, into August as well. Russia will cut 0.5 mbpd in exports next month. Therefore, the expected lower supply of crude oil into the global market pushed the prices up.
The upward pressure sustained even as the drop in US crude oil inventory was lesser than expected. The Energy Information Administration (EIA) data shows that the inventory declined by 1.5 million barrels versus the expected 2.2 million barrels decline.
That said, the charts show that both Brent crude futures and MCX crude oil futures are trading below the trend-defining resistance.
MCX-Crude oil (₹6,063)
The July futures of crude oil, which saw some downward pressure early last week, rebounded from the support at ₹5,750. As it ended the week at ₹6,063, the contract has breached a hurdle at ₹6,000 and it invalidated a falling trendline resistance.
However, the contract is still below the trend-defining level of ₹6,200 and therefore, the range of ₹5,600-6,200 is valid. Only a clear breach of the resistance at ₹6,200 can lead to a sustainable rally.
If that occurs, we can see crude oil futures rallying to ₹6,500 or even to ₹6,750. On the other hand, if the contract declines from the current level, there are supports at ₹5,750 and ₹5,600. A drop below ₹5,600 will change the trend bearish.
Trade strategy: When the contract surpasses ₹6,200, go long with a stop-loss at ₹6,000. When the price goes above ₹6,400, tighten the stop-loss to ₹6,250. Liquidate the longs at ₹6,500.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.