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Crude Oil Futures Break Below Its 200-DMA, Slips 8.66% In 2 Days On Weak Demand

In the futures market, crude oil for November delivery touched an intraday high of Rs 2,974 and a low of Rs 2,662 per barrel on the MCX

Oct 29, 2020 / 05:59 PM IST

Crude oil futures dropped to Rs 2,665 per barrel on October 29 as participants increased their short positions. Prices extended their decline in the afternoon session, erasing morning gains, due to huge build-up in US crude stockpiles, sell-off in global equities, surging coronavirus cases in the US and European countries and uncertainty ahead of US presidential elections.

The US Energy Information Administration (EIA) reported that crude inventories jumped by 4.3 million barrels for the week ended October 23.

French President Emmanuel Macron announced a national lockdown beginning October 30 to last at least one month. While German Chancellor Angela Merkel reached a deal for a one-month partial lockdown to curb the spread of COVID.

According to US Bureau of Safety and Environmental Enforcement, about 66.6 percent of Gulf of Mexico crude production was shut as of October 28 owing to hurricane Zeta as against 49.45 percent on October 27.

US economic data released on October 28 was mixed as durable goods orders and Richmond Fed Index data was better than expectations, while the consumer confidence reading disappointed.

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The head of Saudi Aramco’s trading unit warned there may not be enough oil demand to absorb a planned OPEC+ supply increase in January. 

West Texas Intermediate crude was down 3.96 percent at $35.91 per barrel, while Brent crude, the London-based international benchmark, slid 3.63 percent to $38.20 per barrel.

MCX iCOMDEX Crude Oil Index dropped 113.56 points, or 3.54 percent, to 3,098.55 at 16:04 hours.

Tapan Patel- Senior Analyst (Commodities), HDFC Securities, expects crude oil prices to trade sideways to down with support at $36 and resistance at $39. "MCX Crude oil November has support at Rs 2,720 and resistance at Rs 2,830."

In the futures market, crude oil for November delivery touched an intraday high of Rs 2,974 and a low of Rs 2,662 per barrel on the Multi-Commodity Exchange (MCX). So far in the current series, black gold has touched a low of Rs 2,662 and a high of Rs 3,127.

Crude oil futures for November delivery fell Rs 98, or 3.54 percent, to Rs 2,676 per barrel at 16:08 hours IST on a business turnover of 3,019 lots.

The same for December delivery slipped Rs 84, or 2.99 percent, to Rs 2,726 per barrel on a business volume of 109 lots.

The value of November and December’s contracts traded so far is Rs 1,136.07 crore and Rs 2.34 crore, respectively.

Trading strategy

Sriram Iyer, Senior Research Analyst at Reliance Securities

International Oil prices extended losses this Thursday afternoon trade in Asia as governments renewed restrictions to curb the second wave of coronavirus infections. Signs of a growing global oil supply glut also weighed on prices.

Markets also shrugged off the prospect of tighter short-term supply as Hurricane Zeta made landfall in Louisiana.

Markets could also look to cues from US GDP data today evening. Technically, NYMEX WTI Crude Oil has given a breakdown below its multiple support zone near $36.80 levels further downside could be seen towards $35.95-$35.40 levels. Resistance is at $37.12-$37.90 levels.

Domestic oil tracked overseas oil and was trading weaker this Thursday afternoon session. Technically, MCX Crude Oil November has given a breakdown below 200-DMA which is at Rs 2,762 levels and prices could see some further sideways to marginal downside momentum in the coming session. Support holds at Rs 2,711-2,650 and resistance at Rs 2,750-2,795 levels.

Anuj Gupta - DVP- Commodities and Currencies Research, Angel Broking

We expect price may continue trade lower on the back of lower demand. US crude stockpiles rose more than expected in last week as production surged in a record build. However, hurricane Zeta may curb the sharp downfall in crude oil.

As of today, Traders can go for sell in Crude oil at Rs 2,820 with the stop loss of Rs 2,880 and the target of Rs 2,770. We expect WTI crude oil may test $34 levels soon.

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Sandeep Sinha
first published: Oct 29, 2020 05:59 pm

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