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Crude oil futures jump nearly 2% on rising fuel demand; Brent trades near $71/bbl

Crude oil prices traded higher on higher demand outlook from US, Europe and China with reopening of economic activities.

Mumbai / June 01, 2021 / 04:52 PM IST
Source: Reuters

Source: Reuters

Crude oil futures edged higher on optimism that fuel demand will grow in the next quarter with the reopening of economic activities. The oil price rose amid positioning for OPEC+ meet today to review the global market and discuss their production strategy.

On the MCX, crude oil delivery for June gained Rs 97, or 1.99 percent, to Rs 4,967 per barrel at 16:10 hours IST with a business turnover of 11,098 lots. While delivery for July soared Rs 92, or 1.89 percent to Rs 4,968 per barrel with a business volume of 652 lots.

The value of June and July’s contracts traded so far is Rs 1,109.62 crore and Rs 33.36 crore, respectively.

West Texas Intermediate (WTI) crude rose 2.70 percent to $68.11 per barrel, while Brent crude, the London-based international benchmark climbed 2.02 percent to $70.72 per barrel.

“NYMEX crude trades higher near $68.1/bbl ahead of OPEC+ meeting as the group is expected to keep production policy unchanged. Also supporting price is hopes of higher travel demand in the US and Europe this summer. However, weighing on price is a rise in OPEC production, jump in US crude oil rig count to April 2020 highs and virus-related restrictions in Asia. Crude may trade higher on hopes that OPEC may maintain production policy”, Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities.

Close

Tapan Patel- Senior Analyst (Commodities), HDFC Securities said, “Crude oil prices traded higher on higher demand outlook from US, Europe and China with reopening of economic activities. The strong factory activity data from China and weaker dollar has pushed oil prices higher with US markets returned from Holiday. The higher demand expectations from upcoming summer driving season have also supported oil prices to trade up. The market is awaiting the outcome from OPEC plus meeting scheduled today.”

The OPEC has been raising its oil production in May, but lower output in Nigeria, Angola and Iran partly offset major increases from top producers Saudi Arabia and Iraq to result in a lower-than-expected rise in the cartel’s supply.

OPEC’s 13 members have produced 25.52 million barrels per day (bpd) this month, an increase of 280,000 bpd from April, Reuters reported.

However, weighing on price was the prospect of higher supply from Iran as world leaders continue to negotiate terms to revive the 2015 nuclear deal.

Technicals

The black gold has been trading higher than 5, 20, 50, 100 and 200 days' simple moving averages and exponential moving average on a daily chart. The momentum indicator Relative Strength Index (RSI) is at 62.21, indicating positive movement in prices.

Trading Strategy

Crude oil prices are expected to trade up for the day with resistance at $70 and support at $67 per barrel. MCX Crude oil June has support at Rs 4,890, resistance at Rs 5,040, said Patel.

Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited said the price is likely to trade in moderately bullish trend as it sustains above the support of Rs 4,885 and it is likely to test the resistance at Rs 4,950 in today’s session.

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Sandeep Sinha

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