The crude oil price is under pressure. The robust rally in the oil prices that had begun in June last year, halted last month. However, the prices have tumbled over the last few weeks after making a peak in January. The crude oil futures contract on the New York Mercantile Exchange (NYMEX) made a high at around $66/barrel in January. The contract has slumped over 10 per cent from this high and is currently trading at around $59.

On the domestic front, the crude oil futures contract on the Multi Commodity Exchange (MCX) peaked at ₹4,271 per barrel on January 29. The contract has tumbled 11 per cent from its high, in tandem with the Nymex contract over the last couple of weeks. The contract is currently trading at around ₹3,800 per barrel.

Outlook

The key support at $58 on the Nymex Crude Oil contract is holding well as of now. If the contract manages to sustain above this support, a relief rally towards $61 and $62 is possible in the near-term. But an immediate break above $62 looks less likely. A pull-back move, thereafter, can drag the prices to $57 or even lower levels. However, cluster of supports in the band between $55 and $57 can slow down the pace of fall and also limit the downside. As such, the contract can remain range-bound between $55 and $62 in the short-term.

The MCX Crude Oil contract has declined below the key support level of ₹4,000 last week. This level may now act as a good resistance. Intermediate bounce to this hurdle may find fresh sellers coming into the market. As long as the contract remains below ₹4,000, a fall to ₹3,600 or ₹3,500 cannot be ruled out in the coming weeks.

Traders with a medium-term perspective can go long on dips at ₹3,650 and accumulate at ₹3,500. Stop-loss can be placed at ₹3,300 for the target of ₹4,200. Revise the stop-loss higher to ₹3,700 as soon as the contract moves up to ₹3,950.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

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