Crude oil prices declined on August 20 on demand worries due to surging cases of COVID-19 Delta variant amid a stronger US Dollar. Crude tumbled over 7 percent so far in the week pressured by slowing growth in China, uneven recovery in the US, and a selloff in equity indices post FOMC minutes.
The energy commodity pared earlier gains and traded in the red after a gap-up start, tracking a muted overseas trend.
On the MCX, crude oil delivery for September slipped Rs 12, or 0.25 percent, to Rs 4,710 per barrel at 16:06 hours IST with a business turnover of 7,233 lots. The delivery for October declined Rs 27, or 0.57 percent to Rs 4,701 per barrel with a business volume of 339 lots.
The value of September and October’s contracts traded so far is Rs 652.60 crore and Rs 16.44 crore, respectively.
West Texas Intermediate (WTI) crude fell 0.77 percent to $63.01 per barrel, while Brent crude, the London-based international benchmark, decreased 0.78 percent to $65.93 per barrel.
NYMEX crude trades in a narrow range below $63.5/bbl. Weighing on crude price are demand concerns amid rising virus cases, a slowdown in the Chinese economy and weakening gasoline consumption in the US. Also weighing on price is Fed’s monetary tightening expectations and volatility in US equities. Crude may trade under pressure amid increasing demand concerns however any stability in the US equity market could keep a floor to prices,” said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities.
Prathamesh Mallya, AVP Research Non-Agri Commodities and Currencies, Angel Broking Ltd said, “Surge in the infected cases leading to renewed restrictions in major Oil consuming economies like Japan & China and increasing travel curbs ignited worries over weaker demand for Oil. Also, slower than expected growth in industrial sectors, falling daily Crude processing, high level of inventories and lower profits in China hampered market sentiments.”
Appreciating US Dollar coupled with worries over recovery in the global oil demand in wake of the Delta variant of the Covid19 virus might continue to weigh on oil prices in the week ahead, Mallya added.
Commodities were pressurised by a sharp jump in the US dollar index to November 2020 high amid safe-haven buying and increasing discussion about Fed’s monetary tightening post FOMC minutes.
The black gold has been trading lower than 5, 20, 50 and 100 days' moving averages but higher than the 200-day moving averages on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 30.68, which suggests an oversold level in the prices.
Tapan Patel- Senior Analyst (Commodities), HDFC Securities
Crude oil prices gained in the morning trade paring some previous losses. Crude oil prices are trading under pressure set to report a weekly decline of 6 percent on weaker demand. The China COVID restrictions and rising virus cases in other parts of the world have dampened the demand outlook. Crude oil prices also added pressure on the strong dollar and a fall in equity indices following weak global cues.
Crude oil prices are expected to trade sideways to down for the day with resistance at $65 and support at $62 per barrel. MCX Crude oil September has support at Rs 4,690, resistance at Rs 4,820.
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