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Crude oil prices edged lower on August 16 on weak demand outlook in China and rising coronavirus cases. Also, weighing on the price is weak economic data in China and the United States, increase in US crude rig count and firm dollar.
The energy commodity traded in the red after a gap-down start, tracking a weak global trend.
On the MCX, crude oil delivery for August declined Rs 77, or 1.52 percent, to Rs 5,004 per barrel at 15:52 hours IST with a business turnover of 5,534 lots. The delivery for September dropped Rs 78, or 1.53 percent to Rs 5,004 per barrel with a business volume of 1,797 lots.
The value of August and September’s contracts traded so far is Rs 736 crore and Rs 213.90 crore, respectively.
West Texas Intermediate (WTI) crude fell 0.92 percent to $ 67.58 per barrel, while Brent crude, the London-based international benchmark, slipped 0.79 percent to $ 70.03 per barrel.
Sriram Iyer, Senior Research Analyst at Reliance Securities said, “International oil prices fell more than 1% on Monday early afternoon trade in Asia extending losses from Friday after official data showed that refining throughput and economic activity slowed in China in an indicator that fresh COVID-19 outbreaks are pressuring the world’s no.2 economy.”
“Technically, WTI Crude Oil is below the important 100-Daily Moving Average at $ 67.65 levels and a sustained trade below could see a continuation of the Bearish momentum up to $ 66.50-$ 66.30 levels. Resistance is at $ 67.70-$ 68.33 levels. Technically, MCX Crude Oil August is below the important resistance Rs 5,100 level and could witness a Bearish momentum in the counter up to the supports Support is at Rs 4,950”, Iyer added.
The price traded under pressure as a bearish demand outlook from the International Energy Agency (IEA) offset a somewhat bullish demand forecast from OPEC despite concerns regarding the spread of the Delta variant of coronavirus.
The CFTC data showed that money managers decreased their net long positions by 17883 lots in last week.
The number of rigs drilling crude oil in the US rose by 10 to 397 for the week to August 13, said Baker Hughes in a weekly report.
Technicals
The black gold has been trading lower than 5, 20, 50 and 100 days’ moving averages but higher than the 200-day moving averages on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 40.07, which suggests sell in the prices.
Trading Strategy
Tapan Patel- Senior Analyst (Commodities), HDFC Securities
Crude oil prices traded lower on weak demand outlook from China and fast-spreading virus infections. Crude oil prices fell for the third day after China factory output and retail sales data disappointed market expectations. China’s crude oil processing last month also fell to the lowest on a daily basis since May 2020.
Crude oil prices are expected to trade down for the day with resistance at $ 69 and support at $ 65 per barrel. MCX Crude oil August has support at Rs 4,910, resistance at Rs 5,060.
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