Crude oil futures trade lower at Rs 3,036 per barrel on weak demand

Crude oil futures traded weak at Rs 3,036 per barrel on October 21 as participants increased short position as seen by the open interest. Crude oil price declined due to buildup in US crude stockpile and rising supply from Libya.

The American Petroleum Insitute (API) reported that US crude inventories decreased by 584,000 barrels against analyst expectation of 1 million barrels decline for the week ended October 16.

Crude prices also remained under pressure amid increased Libyan output and rebound in COVID-19 cases in Europe and North America that has prompted renewed lockdown measures.

West Texas Intermediate (WTI) crude was down 1.29 percent quoting at $41.16 per barrel, while Brent crude, the London-based international benchmark dipped 1.14 percent to $42.67 per barrel.

MCX iCOMDEX Crude Oil Index dropped 12.75 points, or 0.36 percent, at 3,515.71 at 16:00.

“NYMEX crude trades moderately lower near $41/bbl pressurized by API report which noted an unexpected 0.584 million barrel increase in US crude oil stocks. Also weighing on price is rising Libyan output and lack of any suggestion by OPEC’s review committee. Crude may remain sideways to lower ahead of inventory report but overall bias may be on the downside amid increasing demand concerns," said Ravindra Rao, VP-Head Commodity Research, Kotak Securities.

In the futures market, crude oil for November delivery touched an intraday high of Rs 3,058 and an intraday low of Rs 3,013 per barrel on the MCX. So far in the current series, black gold has touched a low of Rs 2,798 and a high of Rs 3,127.

Crude oil delivery for November slipped 9, or 0.30 percent, to Rs 3,036 per barrel at 16:02 hours IST with a business turnover of 3,324 lots.

Crude oil delivery for December gained Rs 9, or 0.30 percent, to Rs 3,059 per barrel with a business volume of 25 lots.

The value of November and December’s contracts traded so far is Rs 650.47 crore and Rs 0.30 crore, respectively.

Trading strategy

Sriram Iyer, Senior Research Analyst at Reliance Securities

International oil prices are trading marginally weaker this Wednesday afternoon trade in Asia after US inventory build feeds oversupply fears. Crude inventories rose by 584,000 barrels in the week to October 16 to about 490.6 million barrels, data from industry group API showed.

Technically, NYMEX WTI Crude Oil holds a multiple resistance zone near $42.00 levels below which could see some sideways to marginal downside momentum. Resistance is at $41.91-$42.86 levels and Support is at $40.60-$40.16 levels.

Domestic crude futures are trading marginally lower and could remain range bound on October 21, tracking overseas prices. Markets could look to cues from the official data from EIA on October 21 night.

Technically, MCX Crude Oil November holds a support near Rs 2,980 from where it bounced back on October 20, indicating a positive breath upto Rs 3,073-3,123 levels where support holds at Rs 3,030-2,980 levels.

Tapan Patel- Senior Analyst (Commodities), HDFC Securities

Crude oil prices traded down, with NYMEX WTI Crude oil prices falling by more than 1 percent to $41 on October 21. MCX Crude oil November futures were trading half a percent down to Rs 3,030 by noon session in line with weak global oil prices.

Crude oil prices declined on oversupply concerns and demand growth worries despite rising hopes for US stimulus package. The US API report showed that weekly crude oil inventories rose by 584000 barrels against a forecast of a decline of 1.9 mb.

We expect crude oil prices to trade sideways to down with support at $39 and resistance at $42. MCX Crude oil November has support at Rs 2,970, resistance at Rs 3,090.