Crude prices extended the decline last week. The Brent crude oil futures on the Intercontinental Exchange (ICE) ($70.40/barrel) dropped 3.3 per cent. Similarly, the crude oil futures on the MCX (₹5,858/barrel) posted a loss of 4.2 per cent.
Brent futures ($70.40)
Brent crude oil futures dropped to a low of $68.33 on Wednesday. But after trading below the critical support of $69 briefly, the contract saw a recovery.
While it is now trading in the support band of $69.00-70.70, the broader bias remains bearish.
From the current level, it might see an upswing to $73. It is then likely to resume the downtrend, which can potentially drag the contract below $69. In such a case, Brent crude futures can decline to $62.
MCX-Crude oil (₹5,858)
The March crude oil futures slipped below the support at ₹6,000 and made a weekly low of ₹5,685 on Wednesday before recovering to the current level of ₹5,858.
The trend continues to be bearish. That said, we are likely to see an uptick from the current level. But this can be limited to ₹6,100, where a falling trendline and the 20-day moving average coincides.
A fall, either from the current level or after a rise to ₹6,100 can drag the contract to ₹5,500, a support. Subsequent support is at ₹5,000.
On the other hand, if the contract moves past ₹6,100, it will face a hurdle at ₹6,400. Only a decisive breakout of ₹6,400 can turn the short-term outlook bullish.
Trade strategy: Short crude oil futures at ₹6,100 with a stop-loss at ₹6,350. Book profits at ₹5,500. After going short, when the price declines to ₹5,800, trail the stop-loss to ₹6,100.