Crude oil prices tumbled last week on concerns of global economic slowdown. Brent futures on the ICE (Intercontinental Exchange) slumped 8.7 per cent and crude futures on the MCX (Multi Commodity Exchange) dropped 9.6 per cent last week to end at $94.9 and ₹7,086 per barrel, respectively. Although the tightness in supply continues, the fear of the demand tumbling has weighed on the prices.

On the other hand, the supply side constraints look difficult to be addressed anytime soon. The OPEC, in their latest statement, has noted that the excess capacities are limited because of the under-investment in the oil sector. Nevertheless, at the current juncture, the fear of a dip in demand will most likely keep the prices lower.

The chart is indicating that the trend has turned bearish as the prices have breached some key technical levels and the fall will most probably continue this week.

Brent futures ($94.92)

The Brent futures on the ICE depreciated last week and breached the crucial support band of $98-100 as it closed the week at $94.92. This has turned the trend negative for the contract and so, the chance of a decline is highly likely.

The contract is expected to drop in the coming week and most probably, it might touch $86 – its nearest support. If this level is taken out, the price can fall to $80. Thereafter, there might be a short-term consolidation or a minor corrective rally. But that can be capped at $86.

But if the contract recovers from here, it will face resistance in the price band of $98-100. A move above $100 can lift the price to $108. Yet, we might not see a rally beyond $108.

MCX-Crude oil (₹7,086)

The MCX crude futures, which was moving along a horizontal trend, invalidated the support, turning the outlook bearish. Last week, the contract slipped below the lower boundary of the range of ₹7,150-9,000. It made an intraweek low of ₹6,944 before closing the week higher at ₹7,086. Therefore, the contract is likely to stay bearish at least in the near term.

So, in the coming week, the contract will most likely fall from the current level towards the nearest support at ₹6,650. A breach of this level can drag the contract to the subsequent support at ₹6,300.

Once the contract touches this level, we might witness a corrective rally which can take the contract back to ₹6,650. Post this, there might be a consolidation wherein the contract could oscillate between ₹6,300 and ₹6,650.

On the contrary, if the contract moves up from here, it can face resistance at ₹7,150. Above this level, it can face a hurdle at ₹7,500. A rally beyond this level is less likely.

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