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Crude oil produced a second consecutive weekly gain as the prices were up last week. The Brent crude futures on the Intercontinental Exchange (ICE) closed with a 1.7 per cent gain as it ended the week at $77.1 a barrel. In similar lines, the MCX crude oil futures (June contract) was up 1.3 per cent last week as it closed at ₹6,004 per barrel on Friday.
The gain was propelled by an unexpected significant draw of crude oil from the inventories in the US. The latest Energy Information Administration (EIA) data show that the crude oil stocks fell by a substantial 12.5 million barrels as against the expected increase of nearly 2 million barrels.
Participants should brace themselves for higher volatility this week. The talks of US debt ceiling have spilled over to this week and the issue must be addressed before June 5 to avoid any financial mishaps. On the other hand, the OPEC+ is set to meet on June 4. These factors could keep the volatility high.
That said, technically, crude oil is yet to breach a key resistance level and thus, the trend has not turned bullish despite last week’s upswing.
MCX-Crude oil (₹6,004)
The June futures of crude oil rallied to register an intraweek high of ₹6,190 on Wednesday. However, it gave away some of the gains in the following sessions, ending the week at ₹6,004. The rise last week has hit the stop-loss at ₹6,100 for the short position that we had recommended.
Although the contract closed above ₹6,000, this cannot really be considered as a decisive break out. Bears are still in the game. However, on the downside, there is a good support at ₹5,900. So, traders should be watchful of the ₹5,900-6,000 price band. A clear breach of either of these levels is expected to give us some certainty about the next leg of trend.
Resistance above ₹6,000 are at ₹6,200 and ₹6,500. On the other hand, supports below ₹5,900 are at ₹5,625 and ₹5,500.
Trade strategy: Risk averse traders can stay on the sidelines this week as the volatility is expected to be high. Traders with higher risk-appetite can take fresh positions along the direction of the break of the ₹5,900-6,000 range.
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