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Crude oil witnessed volatile sessions over the past week and eventually posted a weekly loss. The Brent crude futures on the Intercontinental Exchange (ICE) lost 1.6 per cent as it ended the week at $74.8 a barrel. Likewise, the MCX crude oil futures (July contract) was down 1.3 per cent last week as it closed at ₹5,866 per barrel on Friday.
There was an expectation that the OPEC+ could go for a cut in oil production. But in their latest meeting held last Sunday, they decided to stick to the 2023 production targets. Yet, Saudi Arabia announced a voluntary one-month one million barrels per day cut, which can be extended. While this instilled some volatility in prices, it did not help establish a trend.
Similarly, the inventory data of the US released last week, too, failed to guide crude oil in either direction. According to the Energy Information Administration (EIA), the inventory dropped by 0.5 million barrels versus the expected increase of 1.2 million barrels.
The chart, too, shows that the energy commodity is stuck in a range, struggling to find direction.
MCX-Crude oil (₹5,866)
The July futures of crude oil faced hurdle at ₹6,075 and fell off this level and closed the week at ₹5,866. Thus, the narrow range of ₹5,750-6,075 and the broader range of ₹5,580-6,200 remain valid. Unless the contract moves out of the broader range, we cannot assume the next leg of trend.
The risk seems to be evenly balanced and so, the crude oil futures is likely to stay within the range for some more time.
In case the contract breaks out of ₹6,200, we might see a quick rally to ₹6,500 — the nearest barrier. Resistance above this level is at ₹6,800. On the other hand, if the price drops below ₹5,580, it can find a support immediately at ₹5,500. A breach of this level can drag the contract to ₹5,280.
Trade strategy: Since the trend is not clear, stay on the side lines. Yet, traders with high-risk appetite can go long if the price moderates to ₹5,600. Target and stop-loss can be at ₹5,980 and ₹5,480 respectively.
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