Crude oil prices saw a weekly decline for the first time in the last eight weeks. The Brent crude futures on the Intercontinental Exchange (ICE) was down 2.3 per cent as it ended the week at $84.8 a barrel. The MCX crude oil futures (September contract) depreciated 2.4 per cent as it closed at ₹6,726 per barrel on Friday.
The moderation in price was largely due to a weak set of data from China last week, the largest consumer of the energy commodity. Besides, better data, especially of the employment, in the US led to the market discounting the possibility of the rates remaining high for longer, which can dent the demand, thus weighing on the prices.
The above factors led to the drop in price despite the crude oil stockpiles in the US seeing a considerable draw. As per the Energy Information Administration (EIA) data, the inventory in the US dropped by 6 million barrels as against the expected decline of 2.4 million barrels for the week ended August 11.
That being said, the chart shows that the overall bull trend stays valid, and a resumption of a rally is possible.
MCX-Crude oil (₹6,726)
The September futures of crude oil, after marking an intraweek high of ₹6,871 last Monday, declined to post a weekly loss of 2.4 per cent. However, the broader trend remains bullish. The price action hints at good buying between ₹6,600 and ₹6,700. Notably, ₹6,500 is a support. On the other hand, there is a strong barrier at ₹7,000.
Therefore, this week, the crude oil futures might consolidate within the range of ₹6,500 and ₹7,000. However, the chances for the breakout of ₹7,000 is higher compared with the chances of the contract falling below ₹6,500. Only a breach of ₹6,500 can turn the trend bearish. Below ₹6,500, the notable support is at ₹6,250.
In case the bulls gain traction and lift the contract above ₹7,000, we are likely to see a quick rally to ₹7,600.
Trade strategy: Since the inclination is bullish and the contract has seen a correction, we suggest going long now at ₹6,726 and accumulate on a decline to ₹6,600. Place stop-loss at ₹6,425.
When the contract touches ₹7,000, tighten the stop-loss to ₹6,750. Trail the stop-loss further up to ₹7,100 when crude oil futures touch ₹7,300. Exit at ₹7,600.