Commodity Analysis

With prices rising steadily, short-term outlook remains positive for crude oil

Gurumurthy K | Updated on January 22, 2019 Published on January 22, 2019

The new year has begun on a positive note for crude oil. Prices have surged over 15 per cent so far this month. This has come as a relief after prices tumbled in the last quarter of 2018. The crude oil futures contract on the New York Mercantile Exchange (NYMEX) has sky-rocketed 16.5 per cent this month, recovering almost all the losses of December 2018. The NYMEX Crude Oil contract is currently at $53 per barrel.

At home, the crude oil futures contract on the Multi Commodity Exchange (MCX) has surged 20 per cent this month and is currently trading at ₹3,806 per barrel.

Weakness in the Indian rupee has helped the MCX prices outperform the NYMEX prices over this period.

Outlook

The short-term outlook remains positive for oil. The NYMEX-Crude Oil ($53 per barrel) contract has an immediate support at $52. The next significant support is at $50. As long as the contract trades above $50, the outlook will stay positive.

Also, there is an inverted head-and-shoulder pattern visible on the daily chart. This is a bullish reversal. The neckline support of this pattern is also poised in the $52-$50 region. As such there is a strong likelihood of the contract sustaining above $50 in coming days.

Immediate resistance is at $55. A strong break above it can take oil prices higher to $57 and $58 in the near term. A strong break above $58 will then increase the likelihood of it targeting $61 over the short term.

The bullish outlook will get negated only if the NYMEX contract breaks below $50. In such a scenario, a fall to $48 or $48 thereafter cannot be ruled out.

The MCX-Crude Oil (₹3,806 per barrel) futures contract has support in the ₹3,750-₹3,700 region which is likely to limit the downside in the near term. An upmove to ₹4,000 and ₹4,100 looks likely as long as the contract trades above ₹3,700. A further break above ₹4,100 will then pave way for the next target of ₹4,300.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

Read the rest of this article by Signing up for Portfolio.It's completely free!

What You'll Get





This article is closed for comments.
Please Email the Editor