Crude oil prices witnessed a marginal drop last week on demand concerns. Prompt spread in Brent crude i.e., the difference between the price of two nearest contracts dropped from more than $3 a barrel to levels seen in January which is around $0.5 a barrel last week. This indicates softening demand and could be because of demand concerns arising out of China, the largest importer of crude, as Covid cases are on a rise. Another factor could be that several countries are now releasing crude from their stockpiles, denting the previously tight supply scenario for the energy commodity.

As per latest developments, India is buying more oil from Russia. Between April 1 and 8, 540,000 tonnes of Urals crude have been lifted to India which is about 28 per cent of the total Urals crude loaded so far this month. In comparison, India imported 11.4 lakh tonnes in the whole of March. While the price is not known, it is expected to be at a significant discount.

That said, as per the charts, there is no bearish reversal yet as prices continue to hold above key levels. Below is the technical analysis of Brent crude futures and MCX crude oil futures.

Brent futures ($102.78)

The Brent futures on the Intercontinental Exchange (ICE) fell by 1.5 per cent last week and closed at $102.78 a barrel. The contract trades above the support band of $98-100. Until it does so, we cannot assume a bearish reversal. Our expectation has been that the price will continue to fluctuate within the broad range of $100-125. That means, in the coming week, the contract might inch up, possibly to $112. But note that a breach of $98 can trigger a new leg of downtrend which can drag the contract to $86.

MCX-Crude oil (₹7,378)

The continuous futures of crude oil on the Multi Commodity Exchange (MCX) slipped by 2.4 per cent last week to close at ₹7,378 a barrel after marking an intraweek low of ₹7,141. Therefore, the support band of ₹7,000-7,350 stays valid still. Unless this is breached, the decline cannot be counted as a downward reversal.

In the coming week, the contract might see a rally, possibly to ₹8,000. Also, if the up move gains good momentum, it could move even up to ₹8,800. A rally beyond this level is less likely this week. On the other hand, a break down below ₹7,000 can turn the short-term trend bearish. In that case, a fall to ₹6,000 is possible.

Traders with high risk appetite can consider going long at current levels and accumulate on a decline to ₹7,150 since the price area of ₹7,000-7,350 is a support band. Stop-loss can be at ₹6,800. When the futures touch ₹8,000, book three-fourth of your holdings and tighten the stop-loss to ₹7,200. Exit the leftovers at ₹8,500. Note that this is a short-term trade recommendation.

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