Crude oil futures slip 2.30% to Rs 2,805 per barrel on demand concerns

Crude oil futures dropped to Rs 2,805 per barrel on November 6 as participants increased their short position as seen by the open interest. Crude oil price declined after European countries imposed fresh lockdown measures to curb rising coronavirus cases.

Crude oil prices were weighed down by the uncertainty surrounding the US Presidential election outcome.

Global oil supply continues to increase as shut-ins from the summer return and Libya embarks on its speedy recovery. This is despite US declines that have likely started already. We see OPEC+ as likely to delay their planned tapering of production cuts for Q1, said Shin Kim, Head of Supply and Production Analytics, S&P Global Platts.

Kim added that global oil supply is forecast to be down by 6.9 million b/d in 2020 and up by 3.2 million b/d in 2021, about 500,000 b/d lower than our last month’s case for 2021 primarily on lower Q1 OPEC+ supply.

West Texas Intermediate (WTI) crude was down 2.63 percent quoting at $37.77 per barrel, while Brent crude, the London-based international benchmark edged down 2.35 percent to $39.97 per barrel.

MCX iCOMDEX Crude Oil Index slide 76.48 points, or 2.30 percent, at 3,250.35 at 16:00.

“NYMEX crude trades over 1.5 percent lower near $38.05/bbl pressurized by mixed US economic data, mixed inventory report, concerns about rising virus cases and concerns about the impact of a possible win by Joe Biden on the US energy sector and US-Iran relation. However, supporting price is expectations that OPEC may delay further reduction in production cuts. Crude may see extended losses amid persisting demand concerns and uncertainty about the impact of US election on energy sector," 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 2,860 and an intraday low of Rs 2,778 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 fell Rs 66, or 2.30 percent, to Rs 2,805 per barrel at 16:03 hours IST with a business turnover of 2,797 lots.

Crude oil delivery for December slipped Rs 65, or 2.23 percent, to Rs 2,848 per barrel with a business volume of 182 lots.

The value of November and December’s contracts traded so far is Rs 1,505.99 crore and Rs 5.88 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.