Crude oil prices dropped over the past week. Brent crude oil futures on the Intercontinental Exchange (ICE) tumbled 6.2 per cent to close at $84.9 per barrel. Crude oil futures on the MCX slipped 6.1 per cent to end the week at ₹6,696 per barrel.

The prices saw a decline as the fear regarding the war appeared to recede, at least for now. Also, the global growth concerns are creating a worrying situation with respect to demand for the energy commodity in the coming months.

The latest Energy Information Administration (EIA) data showed that the inventory in the US increased less than expected – it went up by 0.8 million barrels compared with the expected increase of 1.5 million barrels for the week ended October 27. But this did not support the prices.

The charts show that the Brent futures is still trading above a support whereas the MCX crude futures has slipped below a support.

MCX-Crude oil (₹6,696)

The November futures of crude oil declined through last week. On Friday, it closed below the support at ₹6,750, a bearish sign. The mid-week attempt to rally was blocked by the resistance band of ₹6,900-7,000.

The contract has also fallen below both 20- and 50-day moving averages, which lies between ₹6,900 and ₹7,100. So, until these levels stay valid, the inclination will be bearish.

From the current level, the nearest support can be spotted at ₹6,500. Subsequent support is at ₹6,250. But note that the price movement in the global market will have an impact and the Brent futures is trading above a support.

So, from a trading perspective, one should be cautious about a rebound while shorting crude oil futures at the current levels.

Trade strategy: Short crude oil futures now at around ₹6,700. Add shorts in case the price rallies to ₹6,900. Place stop-loss at ₹7,120.

When the contract falls to ₹6,500, tighten the stop-loss to ₹6,720. Book profits at ₹6,250. There could be a bounce off this level.