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Crude oil prices snap five-day winning streak, demand outlook remains robust

Market players will take further cues from US EIA weekly inventory data due later in the day.

Mumbai / June 03, 2021 / 05:28 PM IST

Crude oil futures pared earlier gains to slip in the red as the prices were unable to stay at high levels. However, the prices managed to hold above Rs 5,000 per barrel on a strong demand outlook.

The crude price extended weakness to trade at day’s low after a gap-up start on the subdued global trend.

On the MCX, crude oil delivery for June eased Rs 17, or 0.34 percent, to Rs 5,009 per barrel at 16:38 hours IST with a business turnover of 9,873 lots. The delivery for July dropped Rs 17, or 0.34 percent to Rs 5,012 per barrel with a business volume of 767 lots.

The value of June and July’s contracts traded so far is Rs 1,095.73 crore and Rs 26.28 crore, respectively.

West Texas Intermediate (WTI) crude was slightly up 0.22 percent to $68.98 per barrel, while Brent crude, the London-based international benchmark, rose 0.22 percent to $68.98 per barrel.

Close

“NYMEX crude trades marginally lower near $68.7 per barrel. Although a minor correction is seen since the early session, crude oil still trades near October 2018 highs amid optimism about US demand and OPEC’s stance to continue with gradual production hike and doubts about Iran’s nuclear deal. Crude edged up in the early sessions despite a mixed API report which noted a sharp drop in US crude stocks but an unexpected increase in gasoline and distillate stocks. Crude has continued to set new highs indicating strong upward momentum however the rally may sustain only if the inventory report is positive,” Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities.

Tapan Patel- Senior Analyst (Commodities), HDFC Securities said, “Crude oil prices are trading above near term resistance of $68 rallying on the strong demand outlook. Crude oil prices have gained on fuel demand recovery hopes from the US, China and Europe after OPEC forecast higher demand in the second half of the year. OPEC+ data shows that by the end of the year oil demand will be 99.8 mb per day versus supply of 97.5 mb per day.”

For the week ended May 25, hedge fund managers increased their bullish position on WTI crude by 5.2 percent to the highest in three weeks.

The American Petroleum Insitute (API) reported that US crude inventories fell by 5.36 million barrels for the week ended May 28.

Indian state refiners’ daily gasoline demand fell by 19 percent in May from April while diesel consumption dropped by 19.9 percent, as lockdown to curb the second wave of COVID-19 hit industrial activities and consumption.

Market players will take further cues from US EIA weekly inventory data due later in the day. The report will give more clarity about the demand scenario in the summer driving season.

Oil prices have rallied sharply in the last few days in hopes of robust demand in the US during the ongoing summer driving season owing to improving virus situation and easing virus-related curbs.

Technicals

The black gold has been trading higher than 5, 20, 50, 100 and 200 days' simple moving averages and exponential moving average on a daily chart. The momentum indicator Relative Strength Index (RSI) is at 63.25, indicating upbeat movement in prices.

Trading Strategy

Crude oil prices are expected to trade sideways to up for the day with resistance at $70 and support at $67 per barrel. MCX Crude oil June has support at Rs 4980, resistance at Rs 5120, said Patel.

Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited said, “International oil prices are trading with gains as US economy is recovering from COVID-19 which has led to improved fuel demand. On the MCX, the market made a yearly high of Rs 5,079 but could sustain at higher levels and declined more than 70 points. We may expect the market to continue to decline and test Rs 4,950-4,970 levels on the downside in the evening session.”

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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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