Karvy's report on Crude oil
Crude oil prices recoded good amount of volatility during the week wherein it remained on a bearish note for larger half before rebounding from lows in last two days however still closing lower by 1% to $92.25 per barrel at NYMEX
NYMEX October oil moved down to $90.50 per barrel mark, its 8 month lows as Brent extended drop whereas inventory numbers added pressure regarding demand in the US.
In the international markets, Brent oil for same month’s settlement slumped over 3.5% to trade below the $98 a barrel level, its weakest in over 18 months due to ongoing ease in global supply and weak demand forecasts.
Outlook - During the week, global oil prices came under huge pressure tracking developments from the IEA (International Energy Agency) which in its report said global consumption for oil is seen increasing by 1.2 MBPD to 93.8 MBPD in 2015, lower by 165,000 BPD as compared to its own forecast in the previous month. Short-term markets sentiment was further dented by comments that Q2, 2014 consumption for the commodity fell to a near a 2 and ½ year low amidst weakening demand from world’s two largest consumers EU and China. Subdued demand from these regions forced the agency to trim its demand forecast for the current and next year as well.
As per the latest developments in the fresh week, we are seeing good fall in Asian equities along with the industrial commodities which is hurting crude oil prices as well. We saw highly disappointing Chinese Industrial production data during the weekend wherein August IP which grew by just 6.9%. WTI oil prices have declined over a per cent today with Chinese data along with dragging concerns over ease in global oil supply taking a toll on oil prices. Last week, already we have seen a fall by around 4% in Brent crude and probably some of its effect too could be getting replicated into the US Crude as the WTI in electronic session is lower to by 1.2% while today Brent lost around 0.6% to trade near two year low. We may see good gap-down opening in Indian crude today, note that Rupee has depreciated in the opening and would be a critical factor to watch during the day. We recommend selling from higher levels in oil for the day. However, we need to be little cautious about volatility may remain high in US session.
Recommendation: Sell MCX Crude oil at Rs 5630-5625, for the target price of Rs 5570 with a stop loss of Rs 5665.
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