Crude oil futures slumped to Rs 4,373 per barrel on March 25 as participants increased their short positions as seen by the open interest. Crude oil weakened on rising US crude stockpiles, stronger dollar and concerns over demand recovery as nations imposed fresh restrictions to stem the spread of COVID.
Crude oil jumped sharply yesterday after a large container ship ran aground in Suez Canal blocking the crucial trade route from Asia to Europe and will take a few days to free up the vessel despite best efforts by the canal authorities.
The canal is a vital cog for global trade as around 10 percent of global oil and 8 percent of global LNG trade passes through it.
The energy commodity traded in the negative territory after a gap-down start in the afternoon session.
The black gold has been trading higher than 50, 100 and 200 days' moving averages but lower than the 20 and 5 days’ moving average on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 46.24 indicating bearish momentum in prices.
The US Energy Information Administration (EIA) reported that US crude oil inventories jumped by 1.91 million barrels for the week ended March 19.
Market participants are waiting for next week's OPEC+ meet where recent weakness has called into question producers' next strategy to balance the markets.
Sunand Subramaniam, Senior Research Associate at Choice Broking said: “For the week ahead, we are expecting global and MCX crude prices to witness downtrend as series of lockdown in the European Union has led to demand damage in the global market. Moreover, American stockpiles have been reported to be lower at 2.97 million barrels for the week, which is expected to put pressure on the global crude prices.”
“The rising dollar index, bond yields and lockdown in Asian countries have added worries regarding demand scenario. Fed role in the last meetings and other central banks haven’t been hawkish regarding the monetary policy developments,” he added.
MCX iCOMDEX Crude Oil Index fell 78.68 points, or 1.57 percent, at 4,919.15 at 16:03.
In the futures market, crude oil for April delivery touched an intraday high of Rs 4,418 and an intraday low of Rs 4,357 per barrel on MCX. So far in the current series, black gold has touched a low of Rs 4,102 and a high of Rs 4,985.
Crude oil delivery for April tanked Rs 74, or 1.66 percent, to Rs 4,373 per barrel at 16:02 hours IST with a business turnover of 5,448 lots.
Crude oil delivery for May dropped Rs 51, or 1.14 percent to Rs 4,411 per barrel with a business volume of 196 lots.
The value of April and May’s contracts traded so far is Rs 1,367.42 crore and Rs 13.83 crore, respectively.
West Texas Intermediate crude was down 1.91 percent to $60.01 per barrel, while Brent crude, the London-based international benchmark edged lower 1.60 percent to $63.38 per barrel.
Trading Strategy
Tapan Patel- Senior Analyst (Commodities), HDFC Securities
Crude oil prices witnessed a roller coaster move on mixed fundamentals. Crude oil prices rallied in the previous session on supply disruption fears due to shipment blockage in Suez Canal. Crude oil prices traded lower on Thursday as lockdown in some parts of Europe outweighed shipment blockage worries.
The prices are expected to trade sideways to down for the day with resistance at $62 and support at $59 per barrel. MCX Crude oil April has support at Rs 4,320 and resistance at Rs 4,470.
Geojit Financial Services
If the $62 mark resistance remains undisturbed, expect selloffs to continue towards the support of $56. A direct drop below the same would extend further liquidation pressure. An unexpected rise above $64 is a bullish signal. MCX April crude has resistance at Rs 4,518 and support at Rs 4,210.
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