Crude oil prices rise on high demand, dollar downtick; Brent crosses $81 a barrel

Crude oil prices traded firm on the prospect of a pick-up in global growth, higher demand on global power shortage, lower supply and weak dollar. The prices were supported after OPEC plus allies stick to it production quota and increase output by 400,000 barrels per day in November notwithstanding pressure from consuming nations to raise production.

The energy commodity extended gains to trade at day’s high after flat to gap-down start, tracking the upbeat global trend.

On the MCX, crude oil delivery for October rose by Rs 35, or 0.62 percent, to Rs 5,651 per barrel at 16:30 hours IST with a business turnover of 9,717 lots. The delivery for November climbed by Rs 36, or 0.64 percent to Rs 5,642 per barrel with a business volume of 931 lots.

The value of October and November contracts traded so far is Rs 878.81 crore and Rs 32.19 crore, respectively.

West Texas Intermediate (WTI) crude jumped 3.02 percent to $78.17 per barrel, while Brent crude, the London-based international benchmark, gained 3.17 percent to $81.79 per barrel.

“Crude oil prices extended weekly gains rising above three-year high reporting fourth consecutive gain last week. Crude oil traded higher on global power shortage and lower supply. Prices rallied on substitute demand from gas and coal consumers over rising prices. The surge in natural gas prices globally prompts power producers to move away from gas. Crude oil prices got support on expectations that OPEC plus nations may maintain output quota despite rising prices and higher demand,” said Tapan Patel- Senior Analyst (Commodities), HDFC Securities.

Sriram Iyer, Senior Research Analyst at Reliance Securities noted, “International oil prices have turned positive this afternoon in Asian trade ahead of OPEC meeting. We believe that If OPEC+ sticks to its planned 400,000 bpd increase in November, oil could test $90 very soon.”

“On the domestic front, if MCX Crude Oil October trades above Rs 5,600 level, the markets could continue its bullish momentum up to Rs 5,670-5,720 levels. Support is at Rs 5,596-5,545 levels,” Iyer added.

According to CFTC data, speculators raised their net long US crude futures and options positions by 21,067 contracts to 316,676 in the week to September 28.

The number of rigs drilling crude oil in the US increased by 7 to 428 for the week to October 1, the highest since April 2020, said Baker Hughes in a weekly report.

Technicals

The black gold has been trading higher than 5, 20, 50, 100, and 200 days' simple moving averages and exponential moving average on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 70.70, which indicates a buy in the prices.

Trading Strategy

Tapan Patel- Senior Analyst (Commodities), HDFC Securities

We expect crude oil prices to trade up with resistance at $78 per barrel with support at $73 per barrel. MCX Crude oil October contract has important support at Rs. 5470 and resistance at Rs. 5750 per barrel.

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