Why crude oil bulls are in the driver’s seat

Geo-political happenings continue to influence the crude oil prices. While the Ukraine war does not seem to see an end anytime soon, there are fresh threat to the oil market as the Houthi rebels have attacked the Saudi Aramco’s oil facilities. Last week, Yemen-based Houthi rebels carried out drone and missile attacks on two storage tanks in Jeddah, Saudi. Although there was no impact on public life, Saudi has warned of an impact on supply should there be any serious damage in its facilities. This incident drove the crude prices higher last week.

That said, Russia has come out with a huge export program in April amounting to about 2.26 million barrels per day of Ural crude in April to Europe. But as it stands, its unsure whether Russia will be able to sell, even at a huge a discount. If Asia comes in and purchases, there may not be significant disruption in global oil supply. But if not, there can be considerable crunch in crude availability which can push the prices higher to record levels. Technically too, the charts continue to show a bull trend.

Brent futures ($120.65)

The Brent futures on the Intercontinental Exchange (ICE) rallied through last week and closed at $120.65 a barrel on Friday, posting a weekly gain of nearly 12 per cent. Although the closing price is above the resistance band of $115-120, it cannot be counted as a solid break. Therefore, in the coming week, the prices could cool to $110 and then rally again to retest $120 in the next week. So, as we forecasted last week, crude prices could remain largely range bound, possibly between $100 and $120, but with a bullish bias. However, if price sustain above $120 in the first half of the coming week, we could see a rally to $130 before Friday.

MCX-Crude oil (₹8,618)

The continuous futures of crude oil on the Multi Commodity Exchange (MCX) advanced and hit a two-week high of ₹8,858 on Thursday, before closing a little lower at ₹8,618. Thus, it appreciated by about 10 per cent last week. Even though the near-term trend is positive, the contract could see it prices moderate and retest ₹8,000 before crossing over ₹9,000-mark.

Last week, we had recommended to buy crude futures at around ₹7,864 and accumulate if price drops to ₹7,430. But the contract moved up without dropping to ₹7,430. Traders who had followed our recommendation would now have longs executed at ₹7,864 with revised stop-loss at ₹7,800. Continue to hold this position and look for a near-term target of ₹9,400. Fully exit at this level because there might be a decline after the contract reaching the price band of ₹9,400-9,600. For fresh longs, one should wait and enter if price drops to ₹8,000 with same stop-loss and target levels as the above.

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