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Crude oil prices slumped 9 per cent last week. US oil supply increased by 8.2 million barrels to reach record highs last week. This came as a trigger to break a three-month sideways consolidation phase downwards in oil prices.
The Crude Oil futures contract traded on the New York Mercantile Exchange (NYMEX) fell from around $53 per barrel to $48.5 per barrel last week. The contract continues to trade lower.
On the domestic front, the crude oil futures contract on the Multi Commodity Exchange (MCX) also plummeted 9 per cent from ₹3,556 per barrel to ₹3,229 per barrel last week. The oil prices may continue to trade under pressure as there is room for a further fall.
OutlookThe sharp fall last week has taken NYMEX crude oil prices below the 200-day moving average at $48.75. This level now acts as a good resistance and has been capping the upside since Monday.
Crude oil is currently trading at around $47.8. As long as the contract trades below the 200-day moving average, a fall to $46 or $45.80 is possible in the coming days. The region between $46 and $45.80 is a strong support zone. There is a strong likelihood of the fall halting around this support zone. A strong reversal from the $46-$45.80 support may take the contract higher to the 200-day moving average resistance ($48.75) once again.
If the contract manages to surpass this hurdle, the downside pressure will ease and the NYMEX crude oil contract can then rally to $51 or $52 once again. On the other hand, if it breaks below $45.80 decisively, then the current fall can extend to $43.
On the domestic front, the MCX contract is currently trading at around ₹3,142 per barrel. The contract has a key support near current levels in the ₹3,100-₹3,080 region which is likely to be tested in the coming sessions.
If the contract manages to reverse higher, a rise to test the 200-day moving average resistance at ₹3,285 is possible. A strong break above this hurdle will pave the way for the next targets of ₹3,435 and ₹3,500 thereafter.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.
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