Crude oil posted minor gains last week as the inventories dropped in the US for the first time in the last four weeks. As per the latest EIA (Energy Information Administration) data, the crude oil stocks in the country depleted by about 0.2 million barrels as against the expected increase of 1.25 million barrels. In addition, the moderation in the dollar helped the energy commodity on the upside.

This resulted in the Brent futures on the Intercontinental Exchange (ICE) appreciating by one-third of a per cent to close the week at $85.3 per barrel. In terms of rupee, the upside in the oil prices were better because of the currency weakness. The crude oil futures on the Multi Commodity Exchange (MCX) went up 1.8 per cent to end the week at ₹6,539 a barrel.

All eyes will now be on the outcome of the OPEC Plus meet which happens on Wednesday. Broadly, the market expects the group to announce a production cut between 0.5 and 1 million barrels per day. Any cut beyond this level can result in prices propping up.

Another factor that can become significant is the annexation of some regions of Ukraine by Russia. While the initial reaction has been muted post the announcement on Friday, this is an important development which can intensify geopolitical backlashes and impact the crude oil prices.

Taking the above factors into account, traders should brace themselves for a potentially volatile week where the prices could swing in either direction.

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Bullion Cues: Bears pulling the strings

Nevertheless, technically, crude oil stays in the bearish region and there are no signs of a recovery yet at this juncture.

Brent futures ($85.3)

The price pattern of lower highs and lower lows in Brent futures in the daily chart looks to be consistent as the contract, which rallied initially, declined after facing a resistance at $88, ending the week with only a minor gain.

We expect the contract to depreciate towards the support band of $78-80 in the near future. But if there is an up move, the resistances at $95 and $100 are expected to block the bulls.

The trend will turn bullish only if the resistance at $105 is breached. In that case, the contract can rise to $115, which is a considerable barrier.

MCX-Crude oil (₹6,539)

The MCX crude futures, which saw a mid-week rally, faced the 20-day moving average hurdle on Thursday at ₹6,800. The contract declined on the back of this to give away most of the gains it made earlier.

Whilst there were some amounts of short covering seen last week, the contract remains below key resistance levels. That is, the cumulative open interest of crude oil futures on the MCX dropped to 8,836 contracts on Friday compared to 11,907 contracts by the end of the preceding week. But as mentioned earlier, the contract was unable to establish a sustainable rally.

Also, as it stands, there are no technical indications of a bullish reversal. Even if there is a rally from here, it is expected to be limited to ₹7,000.

We foresee a fall from the current level which is likely to drag the contract below the nearest support at ₹6,300. The downtrend can take the crude futures to ₹5,550 in the short run. A fall below ₹5,550 is less likely as this is a significant base.

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