Crude oil prices are on fire over the last few weeks. The Crude Oil futures contract on the New York Mercantile Exchange (Nymex) has surged 13 per cent from $50 per barrel in early October to the current levels of $56.5. The sharp rally since October has taken the oil prices above $55 for the first time since July 2015.

On the domestic front, the contract on the Multi Commodity Exchange (MCX) has surged about 12 per cent from ₹3,300 per barrel to about ₹3,700. The recent weakness in the rupee is also aiding the rally.

Outlook

The Nymex crude oil futures contract has been inching down over the last few days. It tested $58 per barrel last week on Wednesday and has come-off from there. It is currently trading at around $56.5. Inability to bounce above $57 from current levels can push the contract lower to $55 or $54 in the near-term.

The region between $55 and $54 is a strong short-term support zone which is likely to limit the downside. An immediate break below $54 is unlikely. An eventual break above $57 can take the contract higher to $58.6 – the 200-week moving average resistance. Further break above this hurdle will then pave way for the next targets of $60 and $61. The region between $60 and $61 is a key medium-term resistance.

Whether the contract manages to break above $61 or not will then determine the next trend for it.

On the domestic front, the MCX crude oil contract is facing strong resistance at around $3,750. It is currently hovering at the 200-week moving average level of ₹3,725.

As long as the contract stays below $3,750, a fall to $3,500 cannot be ruled out. The level of ₹3,500 is a strong support and further fall below it is less probable. A subsequent upward reversal from ₹3,500 and an eventual break above $3,700, will boost the bullish momentum.

In such a scenario, the contract may gain the potential to target ₹4,000 or even ₹4,300 levels over the medium-term.

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

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