Avoid and exit all long positions below Rs 6000/bbl, as the trend for crude oil prices still remains bearish.
By Bhavik Patel
Crude oil prices are near to those levels where OPEC+ had decided to cut production. Primary reason for the fall of crude price this week was the fear of economic slowdown and recession. Central banks mainly US, Europe and Bank Of England are hiking rates to combat inflation which could slow down the growth and demand for crude. On top of that, demand from China which was expected to increase after opening up from Covid had not increased as anticipated. China is increasing import of crude from Russia due to its availability and cheap price but not because of increase in domestic demand.
Despite OPEC+ cut and Russian cut, crude continues to flow from Russia. Russia’s crude oil shipments continued to average a high of 3.4 million barrels per day (bpd) in the week to April 21 despite the 500,000 bpd production cut Moscow claims to be implementing by the end of this year. Most of Russia’s crude is now going to Asia, predominantly to China and India.
Russia’s cut has not been missed by the market as Russia’s crude is being processed in Asia and re-routed to Europe. Next week is golden week holiday for China and in the first week of May it is expected to see 9 million air passenger trips, a 30% increase to 2019 levels. This might boost sentiment for crude prices. Right now money managers are not very bullish on crude. Managed money investors have purchased a net equivalent of 20 million barrels in the six key futures and options contracts in the week ending April 18, the lowest growth in net length in April and a sign of the build wearing out.
In MCX, the trend for crude oil is still bearish. Price is under the 20 and 50-day moving average while the 200 day moving average is above the price since last July. Momentum oscillator also points to bearish trend as RSI_14 is at 41. In MCX Crude oil 19 May contract, 6000 is strong support as this year 6000 level support has been respected 4 times and any breach and close below 6000 have seen prices tumbling till 5800 and 5300. So we would recommend only a short position below 6000 for next expected target of 5800 and stoploss of 6100 or taking a long position with stoploss of 6000 and target of 6300. Any long position should be exited below 6000.
Source:financialexpress.com