Crude oil prices retreat after touching fresh 52 week high of Rs 5,956/barrel

Crude oil prices rose for the fourth day on October 6 to touch a new 52-week high of Rs 5,956 a barrel on the MCX, the highest since October 2014 on rising energy demand in Asia and Europe and global tightness after OPEC + allies stuck to their output agreement.

The upside, however, was capped by dollar appreciation, weakness in equity markets, rising inflation concerns and prospects of faster tapering by the Federal Reserve.

“Crude oil prices rose for the fifth consecutive day rallying to the highest level since 2014. Crude oil prices traded up on lower supply worries and rising energy prices including natural gas and coal,” said Tapan Patel- Senior Analyst (Commodities), HDFC Securities.

The energy commodity seesawed between gains and losses after a gap-down start, tracking mixed global cues.

On MCX, crude oil delivery for October rose Rs 3, or 0.05 percent, to Rs 5,898 at 1636 hours, with a business turnover of 10,868 lots.

The delivery for November jumped Rs 1, or 0.02 percent, to Rs 5,885 with a business volume of 1,399 lots.

The value of October and November contracts traded, so far, is Rs 1,847.96 crore and Rs 64.94 crore, respectively.

West Texas Intermediate (WTI) crude eased 0.47 percent to $78.56 per barrel, while Brent crude, the London-based international benchmark, climbed 1.14 percent to $82.19 per barrel.

Crude oil prices capped upside with a rise in weekly inventories. The American Petroleum Institute (API) data shows that oil stockpiles rose by 0.95 mb in the previous week, he said.

API reported that US crude inventories rose 950,000 barrels per day (Bpd) for the week ended October 1 against a forecast of 300,000 Bpd build.

Patel said crude is expected to trade sideways to up, with resistance at $80 and support at $76 per barrel, he said.

“MCX Crude oil October has support at Rs 5,820, resistance at Rs 5,980,” Patel said.

Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel One Ltd, said gains for crude were capped as appreciation in the dollar made the dollar-denominated oil less desirable for other currency holders.

“Also, increasing power usage limitations in China and worries of the impact of the virus on the global economy weighed on market sentiments,” he added.

The spread between WTI and Brent November contract widened from $3.99 to $4.03 a barrel as Brent fell less than WTI crude.

Market participants will take cues from weekly EIA inventory data to be released later in the day.

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 77.54, which indicates an overbought level in the prices.

Trading Strategy

Sriram Iyer, Senior Research Analyst, Reliance Securities

WTI Crude oil will continue its upside momentum above $78, with resistance at $78.88-$79.80. Support is at $77.89-$76.90 levels.

Above Rs 5,850, MCX October crude could see bullish momentum up to Rs 5,930-5,980 levels. Support is at Rs 5,846-5,790 levels.

Anand Rathi Investment Services

Crude may retreat to Rs 5,850 as investors will closely watch the US inventory data and US labour report due later this week after API reported a second consecutively buildup.

MCX Crude oil faces resistance at Rs 5,956.85-6,013, whereas support is at Rs 5,809.85-5,775.15.