Crude oil prices crossed Rs 6,100 a barrel, reversing two days of fall on rising demand, revival in economic activity, tight supplies and firm equity market. Crude prices were supported by a decline in the dollar, while higher coal and natural gas prices may result in fuel switching, which will boost demand.
The energy commodity traded in the green in the evening session after a positive start, tracking a bullish global trend.
On the MCX, crude oil delivery for October increased Rs 61, or 1.01 percent, to Rs 6,123 at 1614 hours, with a business turnover of 5,6942 lots.
The delivery for November rose Rs 60, or 0.99 percent, to Rs 6,094 with a business volume of 3,063 lots.
The value of October and November contracts traded so far is Rs 490.34 crore and Rs 249.94 crore, respectively.
West Texas Intermediate (WTI) crude jumped 1.22 percent to $81.42 per barrel, while Brent crude, the London-based international benchmark, soared 1.29 percent to $84.25 per barrel.
Sriram Iyer, Senior Research Analyst at Reliance Securities said: “Crude oil prices pared previous losses on larger-than-expected inventory draw. The US API said US crude stockpiles rose by 5.2 million barrels for the week ended Oct. 8."
"The US EIA said on Wednesday that crude oil output in the United States, the world's biggest producer, is going to decline in 2021 more than previously forecast.,” said Tapan Patel, Senior Analyst (Commodities), HDFC Securities.
Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel One Ltd, said, “Rising fuel demand given the recovery in economic activities amid tighter oil supply and increasing natural gas prices might keep prices elevated.”
“Further supporting oil was the surge in natural gas prices across the globe, which would shift power producers away from gas,” he said.
The IMF slashed its growth forecast for major economies following worries over disrupted supply, and a spike in energy cost might be a setback for the global economic recovery.
The OPEC trimmed its world oil demand growth forecast for 2021 while maintaining its 2022 view. The OPEC now expects oil demand to grow by 5.82 million barrels per day, (bpd), down from 5.96 million bpd in its previous forecast.
But OPEC said surging natural gas prices could boost demand for oil products as the end-users switch.
The American Petroleum Insitute (API) reported that US crude inventories rose 5.2 million barrels for the week ended October 8 against a forecast of 4.57 MB build.
Technicals
Crude has been trading higher than 5, 20, 50, 100, and 200-day simple moving averages and exponential moving average on the daily chart.
The momentum indicator Relative Strength Index is at 77.22, which indicates an upbeat movement in the prices.
Trading Strategy
Sriram Iyer, Senior Research Analyst, Reliance Securities
Technically, if WTI Crude Oil trades below $80, the markets continue to witness a sideways to marginal downside momentum up to the support zones at $79.20-$77.90 levels. Resistance zones are at $80.65-$80.98 levels.
On the domestic front, if MCX Crude Oil October trades below Rs 6,130 the markets could witness a downside momentum up to the support zones at Rs 5,930-5,880 levels. Resistance zones are at Rs 6,126-6,177 levels.
HDFC Securities
Patel expects crude oil prices to trade sideways to up with resistance at $83 and support at $79 per barrel. MCX Crude oil October has support at Rs 6,020 and resistance at Rs 6,190.
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