Crude Check: Crude Oil Ends Week with Gains; Uncertainty Persists

Crude oil, after grinding through last week, managed to end with a gain. The Brent crude futures on the Intercontinental Exchange (ICE) was up 1.4 per cent as it ended the week at $74.9 a barrel. The MCX crude oil futures (July contract) gained 2.2 per cent as it closed at ₹5,799 per barrel on Friday.

The concerns with respect to economic growth, especially of China, the world’s largest consumer of the energy commodity, continues to weigh on the prices. On the other hand, the supply cut announced by Saudi Arabia has been giving some upthrust of late. Other data like the US inventory, especially the latest one, shows some encouraging signs.

According to the Energy Information Administration (EIA), the inventory in crude oil in the US dropped by 9.6 million barrels versus the expected dip of 1.4 million barrels. The bigger-than-expected outflow in crude oil stocks pushed the prices up.

However, overall, the commodity is struggling to find direction as the risks seem to be evenly balanced on both sides. This is reflected on the charts as well, and we can see the price oscillating in a range.

MCX-Crude oil (₹5,799)

The July futures of crude oil marked an intra-week high of ₹5,841 on Friday, before closing a bit lower at ₹5,799. Although the contract lacks trend, it is likely to touch ₹5,900 early next week where a falling trendline is expected to act as a resistance.

Above ₹5,900, there are resistances at ₹6,000 and ₹6,200. On the other hand, the contract has strong support at ₹5,600. Therefore, until the crude oil futures move out of the ₹5,600-6,200, we cannot forecast the next leg of trend.  

A fall below ₹5,600 can intensify the sell-off as this will confirm a triangle pattern. That can lead to a potential fall below the nearest support at ₹5,500 towards ₹5,280.

Trade strategy: The stop-loss at ₹5,540 for the longs taken at ₹5,675 last week was hit before the contract rallied to ₹5,799. Given the paucity of information required to predict the trend, we recommend traders to stay out of the market.