Crude oil futures pared morning gains and turned negative in the afternoon session on May 7 amid concerns over surging Coronavirus cases in India. However, the downside remained capped, supported by a decline in US stockpiles and hopes of stronger demand as restrictions ease in the United States and Europe.
On the MCX, Crude oil delivery for May dropped by Rs 35, or 0.73 percent, to Rs 4,755 per barrel at 16:12 hours IST with a business turnover of 6,789 lots. While delivery for June slipped by Rs 34, or 0.71 percent to Rs 4,775 per barrel with a business volume of 473 lots.
The value of May and June’s contracts traded so far is Rs 924.44 crore and Rs 15.23 crore, respectively.
West Texas Intermediate crude was flat at $64.72 per barrel, while Brent crude, the London-based international benchmark was steady at $68.11 per barrel.
“NYMEX crude trades flat near $64.8/bbl. Crude is pressurized by mixed inventory report, mixed economic data from major economies and concerns about rising virus cases in India. However, supporting price is weakness in the US dollar, expectations of higher US gasoline demand and tensions in the Middle-east. Crude may witness further correction amid worsening virus situation”, said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities.
The oil price has come under pressure after testing the highest level since early March.
Saudi Aramco cut its June pricing for Asian buyer by between 10 and 30 cents per barrel, suggesting that producers are worried about rising infection and its impact on demand.
“Firmer fundamentals are expected beginning in May with sequential demand increases. Oil supply growth is expected to lag demand growth with ongoing OPEC restraint (on April 27, OPEC+ decided to maintain its production plan from April 1). That will require stock draws to cover which are expected to be substantial May through August”, said Richard Joswick, Global Head of Oil Pricing, Operations and Trade Flow Analytics, S&P Global Platts.
Platts has tempered its price forecasts accordingly but still expects the next drive for higher prices will likely lead the fundamentals with peaks around mid-year over $70/b.
The black gold has been trading higher than 20, 50, 100 and 200 days' moving averages but lower than the 5-day moving average on a daily chart. The momentum indicator Relative Strength Index (RSI) is at 56.57, indicating positive movement in prices.
Tapan Patel- Senior Analyst (Commodities), HDFC Securities
“Crude oil prices are fluctuating between pandemic worries and economic recovery raising demand hopes. Crude oil prices have capped downside on stronger fuel demand recovery from the US and China while the ease in lockdown measures in Europe has improved investment sentiments. The EIA report showed large inventory draw of 7.99 mb in line with market expectations”, said Tapan Patel- Senior Analyst (Commodities), HDFC Securities.
Crude oil prices are expected to trade sideways to higher for the day with resistance at $67 and support at $64.50 per barrel. MCX Crude oil May has support at Rs 4,830 and resistance at Rs 4,950.
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