Oil prices rise 1.5% on strong global trends; Brent trades above $74 a barrel

Source: Reuters

Crude oil prices traded higher on July 9 as market participants increased their long position as can be seen from the open interest. Crude price recouped yesterday's losses after EIA data showed a much bigger drop than expected in crude and gasoline inventories.

The energy commodity extended gains to trade at day’s high after a gap-up start tracking the strong global trend.

On the MCX, crude oil delivery for July rose Rs 80, or 1.48 percent, to Rs 5,503 per barrel at 16:22 hours IST with a business turnover of 6,630 lots. The delivery for August gained Rs 68, or 1.26 percent to Rs 5,465 per barrel with a business volume of 957 lots.

The value of July and August’s contracts traded so far is Rs 891.03 crore and Rs 31.98 crore, respectively.

West Texas Intermediate (WTI) crude jumped 1.03 percent to $73.70 per barrel, while Brent crude, the London-based international benchmark, edged higher 0.80 percent to $74.70 per barrel.

“NYMEX crude trades higher near $73.70/bbl. Crude oil is choppy amid mixed inventory report, uncertainty about OPEC’s production policy and increased volatility in equity markets. EIA noted a sharp drop in US crude and gasoline stocks but crude production surged to May 2020 highs. Crude oil may remain choppy to lower until there is more clarity about OPEC,” said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities.

The US Energy Information Agency reported that US crude inventories fell by 6.9 million barrels for the week ended July 2 against market expectation of a 4 million barrel drop.

The market upside looks limited as worries remain over that global producers may pump beyond agreed quotas as trouble festered within OPEC+ member countries namely Saudi Arabia and the UAE.

Technicals

The black gold has been trading higher than 20, 50, 100 and 200 days' simple moving averages but lower than the 5-day moving averages on a daily chart. The momentum indicator Relative Strength Index (RSI) is at 56.25, indicating upbeat movement in the prices.

Trading Strategy

Tapan Patel- Senior Analyst (Commodities), HDFC Securities

Crude oil prices traded up with bullish weekly inventory data and higher demand prospects. The US fuel demand surged to 10 mb per day in the week leading up to the July 4 holiday according to the US Energy Information Administration. Crude oil prices capped upside on demand concerns over Delta variant spreading.

The prices are expected to trade sideways to up for the day with resistance at $75 and support at $72 per barrel. MCX Crude oil July has support at Rs 5,420 and resistance at Rs 5,560.

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