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Crude oil trades with modest gain ahead of OPEC+ decision; Brent jumps above $76 a barrel

The crude oil demand outlook is bright as fuel demand is recovering on increased travel in summer season and eased lockdown measures.

Mumbai / July 05, 2021 / 05:45 PM IST

Crude oil prices traded with marginal gains as market players await OPEC plus decision on output quota. The energy commodity climbed Rs 85, or 1.55 percent last week on the domestic bourse.

The energy commodity traded in green after a gap-up start tracking the positive global trend.

On the MCX, crude oil delivery for July rose Rs 11, or 0.20 percent, to Rs 5,608 per barrel at 16:34 hours IST with a business turnover of 9,280 lots. The delivery for August soared Rs 10, or 0.18 percent to Rs 5,571 per barrel with a business volume of 558 lots.

The value of July and August’s contracts traded so far is Rs 491.36 crore and Rs 5.79 crore, respectively.

West Texas Intermediate (WTI) crude was up 0.40 percent to $75.45 per barrel, while Brent crude, the London-based international benchmark, gained 0.35 percent to $76.44 per barrel.

Close

Tapan Patel- Senior Analyst (Commodities), HDFC securities said, “Crude oil prices rallied on delayed OPEC plus nations’ decision over output quota and higher demand prospectus. Crude oil prices gained as OPEC plus nations failed to come at a consensus on raising output in the second half of the year. OPEC plus was forced to delay its meeting until Friday after the UAE blocked a plan of preliminary agreement to raise output by 400,000 barrels per day from August to December.”

“The members will resume meeting on Monday. The OPEC plus members have to respond to higher demand with gradual output hikes to keep the oil market balanced. The crude oil demand outlook is bright as fuel demand is recovering on increased travel in summer season and eased lockdown measures”, he added

“NYMEX crude recovered to trade higher near $75.5/bbl. Crude is choppy amid delay in OPEC+ decision on production policy. OPEC and allies will meet for a third day today to decide on a production hike as well as the extension of current agreement till the end of 2022. UAE has shown disagreement for extension and wants a higher production quota. Crude may remain rangebound ahead of OPEC decision. A compromise deal is still likely and price impact will be dependent on the quantum of production hike. Any hike in line with market reports of about 2 million barrels per day from Aug-Dec may not have much negative impact,” said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities.

The CFTC data showed that money managers decreased their net long positions by 14201 lots in last week.

The number of rigs drilling crude oil in the US rose by 4 to 376 for the week to July 2, said Baker Hughes in a weekly report.

Concerns about an increase in the number of COVID-19 cases in different parts of the world may cap the bullish moe.

Technicals

The black gold has been trading higher than 5, 20, 50, 100 and 200 days' simple moving averages and exponential moving averages on a daily chart. The momentum indicator Relative Strength Index (RSI) is at 73.60, indicating bullish movement in the prices.

Trading Strategy

Tapan Patel- Senior Analyst (Commodities), HDFC Securities

Crude oil prices are hovering above $75 per barrel awaiting OPEC plus decision on output quota. The disagreement amongst the member on increasing oil output has boosted buying in crude oil following stronger demand. The OPEC plus group will resume talks on Monday after they agreed in principle to increase production by about 2 million barrels a day from August to December 2021 and to extend the remaining output cuts to the end of 2022.

Crude oil prices are expected to trade sideways to up for the day with resistance at $76 and support at $74 per barrel. MCX Crude oil July has support at Rs 5,540, resistance at Rs 5,680.

Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited

MCX Crude oil futures opened on a flat note after a session where prices resisted below Rs 5,650 levels. The market is trading in a sideways range of Rs 5,621-5,593 since morning. We may expect a rise in prices in the evening session where resistance levels of Rs 5,650-5,670 may be tested.

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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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