Crude oil prices soared last week, especially on Friday, on the back of geopolitical tensions. Brent crude oil futures on the Intercontinental Exchange (ICE) climbed 7.4 per cent to close at $90.9 per barrel. Crude oil futures on the MCX, too, saw a sharp rally of 5.7 per cent to wrap up the week at ₹7,162.
Although the Israel-Hamas war is set to get worse as Israel begins ground raids, it has not really impacted the physical supply of oil until now, according to the International Energy Agency (IEA). But there are fears that the war could widen, leading to hardening of crude oil prices.
Besides, the US has sanctioned vessels carrying Russian crude which, the US claims, have violated the price cap rules. Overall, the above factors pushed the prices higher and unless the tensions abate, the likelihood of further rally is high in the near term.
Notably, there was a considerable increase in US crude oil stocks. According to Energy Information Administration (EIA) data, the inventory in the US shot up by 10.2 million barrels against the expected decline of 0.4 million barrels. However, this seldom had an impact as the Israel-Hamas news dominated the headlines.
MCX-Crude oil (₹7,162)
The November futures of crude oil, which saw a dip in price mid-week, rallied sharply on Friday and closed at ₹7,162. A close above ₹7,100 is bullish and this is especially true since the broader trend is also up.
Hence, there is a good chance for the contract to rise further. There is a resistance at ₹7,300, but a minor one. Notable resistance levels can be spotted at ₹7,500 and ₹7,700.
While ₹7,100 will now act as a support, a breach of this can drag the contract to the support band of ₹6,750-6,800. Subsequent support is at ₹6,500.
Trade strategy: Risk-averse traders can stay away since the volatility is expected to remain at elevated levels.
Traders who can take high risk can go long at the current level of ₹7,162 and also if the price drops to ₹7,000. Place stop-loss at ₹6,750. When the price hits ₹7,500, tighten the stop-loss to ₹7,300. Exit at ₹7,650.