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Brent crude oil futures on the Intercontinental Exchange (ICE) tumbled nearly 13 per cent last week, the biggest since the final week of July 2022, to end at $83.1 per barrel. Crude oil futures on the MCX, too, saw a sharp fall of nearly 9 per cent to wrap up the week at ₹6,875.
Both contracts have broken some important support levels on the chart. However, the trend-defining support remains valid. That said, it will be tested hard this week.
The price slump was triggered by a weak demand. According to the latest EIA (Energy Information Administration) data, the demand for gasoline in the US dropped to 8 million barrels per day (bpd) last week, the lowest since the beginning of this year.
As per last week’s statement from OPEC Plus, Saudi Arabia has extended the production cut of 1 million bpd until the end of December this year and Russia’s 0.3 million bpd of cut in exports too will be extended till the end of 2023. However, weak demand outweighed the supply concerns leading to a substantial fall in price.
MCX-Crude oil (₹6,875)
The October futures of crude oil crashed below the support at ₹7,375 and also the psychological ₹7,000-mark, indicating strong downward momentum.
However, the trend will not turn bearish until the support at ₹6,500 holds true. Notably, the Brent crude futures, now at $83.1, too, is trading above a key base of $82. Thus, the bulls have not lost completely.
That said, the probability of MCX futures falling to ₹6,500 is high. If there is a recovery post that fall, the contract might rally back to ₹7,000 or ₹7,375.
On the other hand, if the contract breaches ₹6,500, it will open the door for further fall. Support below ₹6,500 can be spotted at ₹6,100 and ₹5,750.
Trade strategy: Stop-loss of ₹7,300 for the longs initiated at ₹7,600 was hit last week. Stay away for now.
Go short if the contract rallies to ₹7,000. Target and stop-loss can be placed at ₹6,500 and ₹7,250 respectively.
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