Crude oil futures steady at Rs 2,896 per barrel on drop in US crude stockpile

Crude oil futures traded flat at Rs 2,896 per barrel on November 5 as participants increased their long position as seen by the open interest. Crude oil price pared morning losses and traded steady in the afternoon session.

The US Energy Information Administration (EIA) reported that US crude inventories dropped by 7.99 million barrels for the week ended October 30.

Crude oil prices lowered as the latest report suggested that Democrat candidate Joe Biden was inching towards victory in a closely contested US presidential election.

West Texas Intermediate (WTI) crude was marginally down 0.08 percent, quoting at $39.12 per barrel, while Brent crude, the London-based international benchmark edged up 0.07 percent to $41.26 per barrel.

MCX iCOMDEX Crude Oil Index was up 4.64 points, or 0.14 percent, at 3,361.60 at 16:00.

“For the week ahead, we are expecting global and MCX crude prices to remain bullish with fall in US crude inventories and American stockpiles. Prevailing stimulus hopes in the US post the presidential election uncertainty is expected to keep prices supported as well,” Sunand Subramaniam, Senior Research Associates at Choice Broking, said.

However, a possible second wave of COVID-19 in the US and Europe with a possible rise in Dollar index due to the same could limit major upside movement in global crude prices, he said.

“NYMEX crude trades lower near $38.6/bbl amid mixed inventory report, disappointing US ADP jobs report and US election uncertainty. Supporting price is expectations that OPEC and allies may delay further reduction in production cuts. Crude might face stiff resistance near $40 as the demand worries won’t allow price to sustain at higher levels. But a weaker US Dollar might support the bulls at lower levels”, said Ravindra Rao, VP-Head Commodity Research at Kotak Securities.

In the futures market, crude oil for November delivery touched an intraday high of Rs 2,908 and an intraday low of Rs 2,846 per barrel on the MCX. So far in the current series, black gold has touched a low of Rs 2,540 and a high of Rs 3,127.

Crude oil delivery for November dropped Rs 6, or 0.21 percent, to Rs 2,891 per barrel at 16:07 hours IST with a business turnover of 3,706 lots.

Crude oil delivery for December slipped Rs 3, or 0.10 percent, to Rs 2,939 per barrel with a business volume of 142 lots.

The value of November and December’s contracts traded so far is Rs 1,207.58 crore and Rs 3.44 crore, respectively.

Trading strategy

Tapan Patel- Senior Analyst (Commodities), HDFC Securities

Crude oil prices pared gains on the probable victory of Democrats which are more favourable to renewable energy. We expect crude oil prices to trade in current range as clear results are yet to come and prices may stick to election speculation.

We expect crude oil prices to trade sideways to down with support at $36 and resistance at $40. MCX Crude oil November has support at Rs 2,780, resistance at Rs 2,950.