Crude oil dips 2.08% to Rs 4,420 per barrel on weak demand outlook, higher supply


Crude oil futures tumbled to Rs 4,420 per barrel on April 5 as participants increased their short positions as seen by the open interest. Crude oil was weighed down by an increase in OPEC+ supply, surging coronavirus cases globally forcing tighter restrictions, jump in US rig counts and the prospect of Iranian crude coming back into the market.

The energy commodity extended decline after a gap-down start in the afternoon session tracking weak global cues. Crude oil had risen Rs 58 or 1.30 percent last week on the domestic bourse. 

The liquid gold has been trading higher than 50, 100 and 200 days’ moving averages but lower than the 5 and 20 days’ moving average on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 48.33 indicating sideways momentum in prices.

The number of rigs drilling crude oil in the US increased by 13 to 337 rigs for the week to April 1, the highest since April 2020, said Baker Hughes in a weekly report. The rigs count rose for the third straight week.

Market players are eagerly awaiting the development of indirect talks between the United States and Iran at Vienna as part of broader negotiations to revive the 2015 nuclear deal between Tehran and global powers.

“NYMEX crude trades 1.7% lower near $ 60.3/bbl. Weighing on crude price is OPEC+ decision to gradually increase output in coming months, rise in US crude oil rig count to April 2020 highs, rising virus cases and the prospect of talks to resolve US-Iran tensions.

“However, supporting crude price is vaccination progress, upbeat US non-farm payrolls data and US infrastructure plan. Crude may witness choppy trade amid mixed factors however general bias may be on the downside owing to the prospect of higher supply on OPEC decision and demand concerns amid rising virus cases”, Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

West Texas Intermediate crude was down 2.08 percent to $ 60.17 per barrel, while Brent crude, the London-based international benchmark fell 2.16 percent to $ 63.46 per barrel.

 MCX iCOMDEX Crude Oil Index decreased 105.64 points, or 2.08 percent, at 4,967.48 at 15:44.

In the futures market, crude oil for April delivery touched an intraday high of Rs 4,503 and an intraday low of Rs 4,410 per barrel on MCX. So far in the current series, black gold has touched a low of Rs 4,102 and a high of Rs 4,985.

Crude oil delivery for April edged lower Rs 94, or 2.08 percent, to Rs 4,420 per barrel at 15:47 hours IST with a business turnover of 5,643 lots. 

Crude oil delivery for May slipped Rs 93, or 2.05 percent to Rs 4,433 per barrel with a business volume of 468 lots.

 The value of April and May’s contracts traded so far is Rs 1,287.94 crore and Rs 20.83 crore, respectively.

Trading Strategy

Tapan Patel- Senior Analyst (Commodities), HDFC Securities

Crude oil prices traded weak on demand outlook worries and ease in OPEC plus output cuts. The OPEC plus nations agreed to ease production curbs by 350,000 barrels per day (bpd) in May, another 350,000 bpd in June and a further 400,000 bpd or so in July. The lockdown amid the third wave of virus cases in Europe and rising cases in India and Brazil has capped an upside in oil prices.

Crude oil prices are expected to trade down for the day with resistance at $ 62 and support at $ 59 per barrel. MCX Crude oil April has support at Rs 4,370, resistance at Rs 4,490.

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