Crude oil prices marginally fell on July 26 as participants trimmed their bullish positions as seen by the open interest. The oil prices traded under pressure on surging COVID cases of Delta variant forced countries to imposed restrictions and fresh floods in China weigh on demand.
Crude oil prices recovered from losses suffered early last week on bargain buying and a strong demand outlook in the second half of the month.
The energy commodity traded in the negative after a gap-down start, tracking the weak global cues.
On the MCX, crude oil delivery for August declined Rs 22, or 0.41 percent, to Rs 5,347 per barrel at 15:51 hours IST with a business turnover of 5,631 lots. The delivery for September eased by Rs 18, or 0.34 percent to Rs 5,311 per barrel with a business volume of 183 lots.
The value of August and September’s contracts traded so far is Rs 1,016.90 crore and Rs 11.93 crore, respectively.
West Texas Intermediate (WTI) crude dropped 0.56 percent to $71.67 per barrel, while Brent crude, the London-based international benchmark, slipped 0.48 percent to $73.09 per barrel.
Sunilkumar Katke, Head - Commodity and Currency, Axis Securities said, “It is predicted that global oil demand is expected to average out around 99.6 MB per day from August 2021 which will be up by 5.4 MB per day from April 2021 numbers. Overall, the oil market looks bullish backed by improved economic projections and oil demand as the vaccination drive gains momentum."
"However, The Delta variant of Covid 19 and its surge in the US, UK and parts of Europe may act as a resistance in the near term and may not be able to hold the prices back for long considering the demand outpacing supply helping the WTI crude prices to near $80 a barrel in the next few months. In the domestic market, we recommend a buy around Rs 5,300 a barrel level and target Rs 5,600 in the next couple of weeks", Katke added.
“NYMEX crude trades lower near $71.5/bbl. Crude is range bound as support from doubts about Iran’s nuclear deal and expectations of slowdown in US shale activity is countered by rising virus cases, mixed economic data from major economies, rise in US crude oil rig count to April 2020 highs and increased US-China tensions. Crude oil is well off the lows however it may struggle to build momentum amid persisting virus risks”, said Ravindra Rao, CMT, EPAT-Quantinsti, Head - Commodity Research at Kotak Securities Ltd.
The prices were supported by the expectation of a tighter global crude market following the reopening in global economies.
The CFTC data showed that money managers decreased their net long positions by 64702 lots in last week.
The number of rigs drilling crude oil in the US rose by 7 to 387 for the week to July 23, said Baker Hughes in a weekly report.
Technicals
The black gold has been trading higher than 5, 50, 100 and 200 days' moving averages but lower than the 20-day moving averages on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 51.12, which suggests a sideways movement in the prices.
Trading Strategy
Tapan Patel- Senior Analyst (Commodities), HDFC Securities
Crude oil prices witnessed selling on demand growth worries rising numbers of COVID-19 cases involving the Delta variant have prompted countries such as Thailand and Vietnam to impose curfews while Germany implemented tougher restrictions for unvaccinated people. The lower demand from China over rising virus cases and fresh floods have also pressured oil prices.
Crude oil prices are expected to trade sideways to down for the day with resistance at $72 and support at $69 per barrel. MCX Crude oil August has support at Rs 5,210, resistance at Rs 5,360.
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