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Crude oil hit fresh high on higher demand prospect; Brent inches closer to $75 a barrel

Crude oil has continued to set new highs indicating upward momentum but there is a disconnect with larger markets and price may succumb to profit taking if inventory report disappoints.

Mumbai / June 16, 2021 / 05:35 PM IST

Crude oil futures hit a fresh high for 2021 and highest since October 10, 2018, on the prospect of higher demand boosted by economic recovery and tighter supply. The oil price pared earlier gains but traded in the positive territory after a gap-up start as investors await EIA weekly inventory report later in the day.

On the MCX, crude oil delivery for June soared Rs 19, or 0.36 percent, to Rs 5,299 per barrel at 16:36 hours IST with a business turnover of 7,062 lots. The delivery for July jumped Rs 22, or 0.42 percent to Rs 5,294 per barrel with a business volume of 3,786 lots.

The value of June and July’s contracts traded so far is Rs 577.08 crore and Rs 174.94 crore, respectively.

West Texas Intermediate (WTI) crude gained 0.26 percent to $72.31 per barrel, while Brent crude, the London-based international benchmark, jumped 0.41 percent to $74.29 per barrel.

NYMEX crude trades modestly higher near $72.3/bbl. Crude oil trades near Oct.2018 highs despite a mixed API report which noted a bigger than expected 8.537 million barrels decline in US crude stocks but also an unexpected rise in gasoline stocks. Crude is firm despite mixed US economic data, concerns about Chinese demand, forecast of higher US output and continuing negotiation to revive Iran’s nuclear deal. Crude oil has continued to set new highs indicating upward momentum but there is a disconnect with larger markets and price may succumb to profit taking if inventory report disappoints,” said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities.

Close

Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd said, “Depleting US Oil inventories and reopening of major economies following a paced vaccine distribution painted a favourable outlook for the Oil market. Profits for Oil were capped as markets remained cautious as the ongoing US Federal Reserve policy meet which ends on 16th June’21 could suggest a shift in the monetary approach of US in the months ahead.”

The American Petroleum Insitute (API) reported that US crude inventories declined 8.53 million barrels for the week ended June 11.

Market tightness signs are visible on the oil curve as the difference between the nearest two WTI December’s contracts closed at more than $6 a barrel, the strongest close since September 2019, sign traders are betting on a stronger market.

The progress on the vaccination front, easing virus-related restrictions and rising inflation pressure has increased appeal for crude oil.

Technicals

The black gold has been trading higher than 5, 20, 50, 100 and 200 days' simple moving averages and exponential moving averages on a daily chart. The momentum indicator Relative Strength Index (RSI) is at 73.94, indicating positive movement in prices.

Trading Strategy

Tapan Patel- Senior Analyst (Commodities), HDFC Securities

Crude oil prices extended gains for the fifth consecutive day supported by a drawdown in weekly inventories and a higher demand prospectus. The US API data showed a draw of 8.53 mb for the week which may reflect in today’s official inventory data.

Crude oil prices are expected to trade up for the day with resistance at $74 and support at $70 per barrel. MCX Crude oil June has support at Rs 5,250, resistance at Rs 5,380.

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Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sandeep Sinha

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