Crude oil posted a negative return for the first time in the last five weeks as prices dropped across the globe. Brent crude futures on the Intercontinental Exchange (ICE) lost 5.1 per cent as it closed the week at $81.5 a barrel. Likewise, the MCX crude oil futures (May contract) was down 5.5 per cent as it ended the week at ₹6,398 per barrel.

The prices declined despite a draw down in the US inventories. According to the Energy Information Administration (EIA) data, crude oil inventory dropped by 4.6 million barrels for the week ended April 14, versus the expected drop of a much lower 0.4 million barrels. The economic growth concerns and the possibility of further rate hikes weighed on prices as they can impact the demand for the energy commodity.

Technically, the prices fell off a crucial resistance level. Find analysis based on charts below.

MCX-Crude oil (₹6,398)

The May futures of crude oil faced a stiff resistance at ₹6,800. Unable to move beyond this level, the contract saw a sharp fall over the past week. But currently trading at ₹6,398, there is a support at ₹6,300, which may arrest the fall temporarily. Subsequent support is at ₹6,000.

That said, the chart shows that the contract is now stuck within the key levels of ₹6,000 and ₹6,800. Unless either of these levels are breached, we cannot confirm the next leg of trend.

A breakout of ₹6,800 can lift the crude oil futures to ₹8,000. The upswing could even extend to ₹8,800. On the other hand, if the price slips below ₹6,000, the outlook can turn negative where we could initially see a quick fall to ₹5,500. A breach of this will open the door for a decline to ₹5,000.

Trade strategy: Stay on the fence for now as the risk-reward ratio is not in favour of taking trades on either side. Fresh trade can be considered based on how crude oil futures react to the levels at ₹6,000 and ₹6,800.