Crude oil prices dropped for the fourth week in a row despite a rally on Friday. Brent crude oil futures on the Intercontinental Exchange (ICE) lost 1 per cent to close at $80.6 per barrel. Crude oil futures on the MCX dropped 2.2 per cent to end the week at ₹6,346.
Demand concerns weighed on the prices. Besides, there has been an increase in the US crude oil inventories. According to the data by Energy Information Administration (EIA), the oil stockpiles increased by 3.6 million barrels versus the expected increase of 2.5 million barrels for the week ended November 10. This is after a 13.9-million barrel increase in the previous week.
But the prices rallied on Friday on the back of profit-booking.
As per the chart, the crude oil futures continue to trade below key levels. Thus, the bearish bias continues to exist.
MCX-Crude oil (₹6,346)
The December futures of crude oil made an attempt to recover early last week. However, after marking a high of ₹6,629 last Tuesday, the contract started to fall. It declined to make an intraweek low of ₹6,056 before a recovery to ₹6,346.
The outlook can turn bullish only if the contract rallies above the resistance at ₹6,650, where the 20-day moving average coincides. In such a case, crude oil futures can rally to ₹7,000 or even to ₹7,250.
On the other hand, the contract has a support band of ₹6,000-6,070. It has bounced off this level last week, showing that it is a strong one. If this level is breached, the contract might see another leg of downtrend, possibly to ₹5,500.
Trade strategy: Although the trend remains bearish, crude oil futures has a support. Also, it remains below a key resistance. Hence, we suggest staying out of the market until either of ₹6,000 or ₹6,650 is breached.