Is MCX Crude aiming for higher levels?

  • Commodities Analysis


The MCX crude oil prices surged to the highest levels in more than a year after the OPEC+ countries surprised the traders by taking the decision of not raising output next month. The Saudi prince doesn't seem to be worried about US shale and that means oversupply concerns for this year are gone. Saudi Arabia's decision to restrain production and maintain the 1 million b/d voluntary production cut has activated the crude bulls. Then the prices got further support after Yemen's Houthi forces fired drones and missiles at the heart of Saudi Arabia's oil industry on Sunday, raising concerns about production. At the same time US is reopening the economy a lot faster due to COVID vaccine success and that will trigger a strong pickup in fuel demand over the next couple of months, so traders wonder how long will this enthusiasm continue?

As seen in the chart below, MCX Crude Oil prices continued to surge as the counter has clocked its 5th consecutive monthly gain. The counter is expected to consolidate its recent gains in the near term as prices approach their psychological level of 5000, a level which was last seen in October, 2018. Weakness below 4800 levels will trigger a corrective move towards 4621/4455 levels in the near term. Any meaningful reversal in the current uptrend though will be triggered only on a monthly close below 4300 levels. Dips will find support until then and the current rally will extend towards 5175/5350 levels once prices start to trade above 5000--5050 levels consistently during the coming weeks. We expect the counter to trade in a broad range between 4400--5350 levels during the coming months on the MCX whereas the range for NYMEX crude oil prices are seen between $57.50--73.75.

Analysis

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