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Crude oil futures resume bearish trend, plunge over 4% to Rs 2,811 per barrel

Concerns over supply disruption from Hurricane Zeta have receded and lack of a US coronavirus fiscal relief package also dented investors' risk appetite and weighed on prices.

October 28, 2020 / 04:50 PM IST

Crude oil futures fell sharply to Rs 2,811 per barrel on October 28 as participants increased short position as seen by the open interest. Crude oil price declined due to sharp buildup in US crude stockpiles offsetting supply disruption caused by Tropical Storm Zeta.

The American Petroleum Insitute (API) reported that US crude inventories expanded by 4.58 million barrels against analyst expectation of 1.1 million barrels decline for the week ended October 23.

According to US Bureau of Safety and Environmental Enforcement about 49.45 percent of Gulf of Mexico, crude production was shut as of October 27 owing to Tropical Storm Zeta as against 15.87 percent on October 26.

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

Markets will look ahead to inventory data from EIA later tonight.


West Texas Intermediate crude was down 4.09 percent quoting at $37.95 per barrel, while Brent crude, the London-based international benchmark slide 3.32 percent to $40.23 per barrel.

MCX iCOMDEX Crude Oil Index dropped 142.53 points, or 4.19 percent, at 3,257.31 at 16:17.

“NYMEX Crude oil trades about 3.8 percent lower near $38/bbl after API noted a bigger than expected 4.577 million barrels increase in US crude oil stocks and an unexpected rise in gasoline stocks. Weakness in equity markets due to risk off has also put pressure on economically sensitive commodities like crude oil. Although the supply disruption in the Gulf of Mexico because of tropical storm Zeta might support the prices, the undertone remains bearish with focus on today's US EIA weekly inventory report with an expectation of buildup in US crude stocks”, said Ravindra Rao, VP-Head Commodity Research at Kotak Securities.

In the futures market, crude oil for November delivery touched an intraday high of Rs 2,887 and an intraday low of Rs 2,807 per barrel on MCX. So far in the current series, black gold has touched a low of Rs 2,798 and a high of Rs 3,127.

Crude oil delivery for November fell Rs 123, or 4.19 percent, to Rs 2,811 per barrel at 16:19 hours IST with a business turnover of 4,142 lots.

Crude oil delivery for December slipped Rs 117, or 3.94 percent, to Rs 2,855 per barrel with a business volume of 91 lots.

The value of November and December’s contracts traded so far is Rs 750.66 crore and Rs 1.12 crore, respectively.

Trading strategy

Sriram Iyer, Senior Research Analyst at Reliance Securities

International and domestic oil prices crashed over 3 percent on Wednesday afternoon trade in Asia as a surge in US crude stocks and growing coronavirus infections in the United States and Europe fanned fears of a supply glut and weaker fuel demand.

Concerns over supply disruption from Hurricane Zeta have receded and lack of a US coronavirus fiscal relief package also dented investors' risk appetite and weighed on prices.

Technically, NYMEX WTI Crude Oil has once again resumed its Bearish trend where it has given a breakdown below $38.50 levels and corrected more than 2 percent indicating a strong bearish momentum in the coming session. Resistance is at $38.80-$39.40 levels and support $38.00-$36.70 levels.

Technically, MCX Crude Oil November has given a sharp fall from its 21-DMA near Rs 2,940 levels and trading with more than 3 percent losses which signify for further downside correction in the counter. Support of 200-DMA is placed at Rs 2,767 levels from where some bounced back can be expected in coming sessions. Resistance is at Rs 2,860-2,940 levels and Support at Rs 2,790-2,760 levels.

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Sandeep Sinha
first published: Oct 28, 2020 04:50 pm
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