Crude oil prices edged higher last week. The Brent crude futures on the Intercontinental Exchange (ICE) went up 1.4 per cent as it closed the week at $85.9 a barrel. Whereas the MCX crude oil futures (May contract) gained 2.4 per cent as it ended the week at ₹6,770 per barrel.

The demand outlook for the energy commodity in 2023 is positive, according to OPEC (Organisation of Petroleum Exporting Countries) and IEA (International Energy Agency), who last week released their projections for this year.

According to the OPEC report, while the demand may be lower in summer, for the whole year it is expected to go up by 2.3 million barrels per day (mb/d) to 101.9 mb/d. Similarly, IEA forecast an increase by 2 mb/d in 2023 taking the total demand to the identical 101.9 mb/d. Higher demand is expected to be largely driven by China, the largest crude oil importer.

Fundamentally, the undertone is clearly bullish. However, the charts show that the energy commodity is still trading below a critical resistance.

MCX-Crude oil (₹6,770)

The May futures of crude oil marked an intraweek high of ₹6,841 last Wednesday. But after briefly trading above the crucial ₹6,800-level, the price retreated to close the week at ₹6,770.

Although the resistance remains valid, the contract retains its bullish bias. It is substantiated by fresh long build-up over the past week. As the crude oil futures rallied, the cumulative Open Interest (OI) increased to 7,720 contracts on April 13 versus 6,923 contracts on April 6, indicating arrival of fresh longs.

If the contract can decisively breach the resistance at ₹6,800, we can see a quick rally to ₹8,000 – a resistance. A breach of this can lift the contract to ₹8,800.

But if the price declines from here, the contract can find its nearest support at ₹6,300. Below this level, ₹6,000 can be a good base which can arrest the fall.

Trade strategy: Stay on the fence for now. Initiate fresh longs if the crude oil futures break out of ₹6,800. Stop-loss and target can be ₹6,300 and ₹7,900 respectively.