Crude oil futures edged higher to Rs 3,532 per barrel on December 31 as participants increased their long position as seen by the open interest. Crude oil price gained after a sharp decline in US crude stockpile and had a gap-up open and traded in flat to positive territory in the afternoon session.
The US Energy Information Administration (EIA) reported that US crude inventories fell by 6.05 million barrels for the week ended December 25.
Crude oil prices advanced amid a weaker dollar which touched its lowest levels since April 2018.
“The year 2020 has been a rollercoaster ride for commodities and especially for crude oil. WTI crude prices fell into negative territory for the first time ever questioning the general market caveat that commodities price cannot be zero. The second half has been equally remarkable as prices surged by leaps and bounds. While crude oil prices have recovered sharply in the last few months, it is still set to end the year with a modest decline. Crude is a commodity which got directly hit by the pandemic as virus-related restrictions dampened fuel demand. Price tanked into negative territory as demand destruction caused by pandemic was coupled with rising US and OPEC supply," said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.
“A large part of crude’s rally has come in the last two months when we have seen significant progress on COVID-19 vaccination. Moreover, OPEC and allies decided to cut production to help rebalance the global market. While we look set to end the year 2020 on a positive note for crude, next year will be equally challenging. This year demand has been impacted by unforeseen but temporary factors while supply has been curbed voluntarily," he added.
"The year 2021 will see normalisation of both demand and supply. Demand recovery is strictly dependent on how quickly the virus outbreak is controlled. On the supply side, OPEC and allies are taking a slow approach; however, supply will increase further from January 2021 even if at a marginal pace. Considering the above factors for 2021 we expect WTI Crude oil to trade in $40-$52/bbl range with an average price of $46/bbl,” Rao added.
Sunand Subramaniam, Senior Research Associate at Choice Broking, said, “For the week ahead, we are expecting global and MCX crude prices to witness uptrend with fall in US crude inventories along with a decline in American stockpiles. Moreover, vaccine optimism could support prices from the major downside movement. The positive UK-EU Brexit deal has improved the sentiments in the market. However, extreme bullishness can be capped as the global markets are closed due to Christmas and New Year." “Overall, we expect a moderate bullish trend in global oil prices in the week ahead,” he said.
West Texas Intermediate (WTI) crude was down 0.35 percent quoting at $48.23 per barrel, while Brent crude, the London-based international benchmark, eased 0.33 percent to $51.46 per barrel.
MCX iCOMDEX Crude Oil Index inched higher by 15.96 points, or 0.40 percent, at 4,027.54 at 15:43.
In the futures market, crude oil for January delivery touched an intraday high of Rs 3,546 and an intraday low of Rs 3,518 per barrel on MCX. So far in the current series, black gold has touched a low of Rs 3,130 and a high of Rs 3,639.
Crude oil delivery for January increased Rs 14, or 0.40 percent, to Rs 3,532 per barrel at 15:44 hours IST with a business turnover of 1,501 lots.
Crude oil delivery for February dropped Rs 29, or 0.80 percent, to Rs 3,600 per barrel with a business volume of 2 lots.
The value of January and February’s contracts traded so far is Rs 115.67 crore and Rs 0.03 crore, respectively.
Trading strategy
Tapan Patel- Senior Analyst (Commodities), HDFC Securities
Crude oil prices traded under pressure as pandemic worries overshadowed bullish inventory data and vaccine hopes. The spreading of a new strain of coronavirus has raised worries over fuel demand recovery. The investors’ interest was muted towards commodities on year-end squaring off.
We expect crude oil prices to trade sideways to up with support at $47 and resistance at $49.50. MCX Crude oil January has support at Rs 3,490 and resistance at Rs 3,590.
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