Crude oil remain range-bound amidst economic concerns, OPEC meeting expectations; go long near Rs 5550/bbl

By Bhavik Patel

Crude oil prices have remained range bound despite growing optimism in the form of declining US inventory. Crude oil found floor on account of huge US decline in inventories but economic concerns remain which is capping any gains on the upside. So in essence, crude is stuck between 5500-5900 in MCX. OPEC members will be gathering in Vienna next week for a two day meet and all eyes will be on them whether Saudi Arabia which has volunteered for production cut will extend beyond July. Saudi Arabia’s extra cuts (1,00,000 bpd) go into effect in July, and prices could tick up as supply tightens. However, data out of China is concerning and central banks around the world including the Fed is in no mood to pause their interest rate cycle which is negative for crude.

Crude oil production levels in the United States stayed at 12.2 million bpd in the week ending June 23, according to the latest weekly EIA estimates, on par with January levels. U.S. production levels are now up just 100,000 bpd versus a year ago. The total number of total active drilling rigs in the United States fell by 8 this week, according to new data from Baker Hughes published Friday, falling by 74 rigs over the last two months.

In MCX, crude oil has solid support in the range of 5500-5550. We have seen five times when prices have re-tested those levels in the span of four months and bounced back. However in the last three times, the bounce has been short-lived till 5970-6000. Momentum oscillator RSI_14 is neutral at 49 and we may see range bound movement with no clear direction.  We would advise traders to wait for the opportunity to either go long near its support zone of 5550 with stoploss of 5450 and expected target of 5800. Alternatively, traders can go short near its resistance zone of 5970 with stoploss of 6050 and expected target of 5500.

(Bhavik Patel is a Sr. Commodity/Currency Research Analyst at the TradeBulls Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)

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