Crude oil prices saw a marginal drop over the past week. Brent crude oil futures on the Intercontinental Exchange (ICE) was down 0.8 per cent by closing at $90.2 per barrel. Crude oil futures on the MCX lost 1.2 per cent by ending the week at ₹7,153 a barrel.

Brent Crude futures ($90.2)

Brent Crude futures, although produced negative return last week, was largely moving in a sideways price band through the week. It was held between $89 and $91.

That said, the broader trend remains up. We expect crude oil futures to regain traction and go up to $96 soon. A breakout of this level can take the contract to $100.

On the other hand, if the contract slips below $89, it can find support at $85. Only a breach of this will turn the near-term trend bearish. Immediately below this level, support levels are at $84 and $81.

MCX-Crude oil (₹7,153)

Since the April futures are nearing expiry, we consider the May contract for the purpose of analysis. This has been in a sideways crawl since the beginning of last week.

The May crude oil futures has been oscillating between ₹7,060 and ₹7,250. Immediately below the range bottom is a support of ₹7,000 where the 20-day moving average coincides. Subsequent support is at ₹6,730. So long as this level holds, the bias will be bullish.

Since the broader trend is bullish, we expect the contract to surpass ₹7,250 and head north towards ₹8,000, a resistance. Note that ₹7,800 is a minor hurdle.

Trade strategy: Last week, we suggested longs at ₹7,284 on April crude oil futures. Roll the longs over to the next expiry.

That is, exit April contract now at ₹7,187 and simultaneously buy May futures at ₹7,153. Add longs if the price dips to ₹7,000. Place initial stop-loss at ₹6,850. On a rally to ₹7,800, raise the stop-loss to ₹7,600. Book profits at ₹7,900.

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