Crude oil futures flat at Rs 3,799 a barrel on demand concerns

Crude oil futures were steady at Rs 3,799 per barrel on January 11 as participants increased their long position, as seen by the open interest. Crude gained 7.42 percent in the previous week on the MCX to surge over 10-month high.

The demand increased after lockdown, as many countries allowed travel in the festival season and people choosing personal vehicles over public transport. Also, supply came down after a surprise production cut from the world's biggest oil exporter Saudi Arabia.

The number of rigs drilling crude oil in the US increased by 8 to 275 rigs for the week to January 8, said Baker Hughes in a weekly report. The rigs count rose for the seventh straight week.

Crude traded under pressure on a stronger dollar and rising coronavirus cases across the globe as countries imposed strict lockdown measures to curb the spread.

"Crude oil prices traded lower, with benchmark NYMEX WTI crude oil were trading half a percent down to $51.90 per barrel on Monday. MCX Crude oil January futures were trading marginal up to Rs 3,817 by noon session,” Tapan Pate, Senior Analyst (Commodities), HDFC Securities, said. 

Crude witnessed selling on worries over fuel demand recovery with a surge in coronavirus cases. The rising count of cases in China created selling pressure as well, he said.

Patel expects crude to trade sideways to up with support at $50 and resistance at $53. MCX January crude has support at Rs 3,760, resistance at Rs 3,870.

West Texas Intermediate crude was down 1.05 percent quoting at $51.70 per barrel, while Brent crude, the London-based international benchmark, fell 1.57 percent to $55.11 per barrel.

MCX iCOMDEX Crude Oil Index inched lower 7.98 points, or 0.18 percent, at 4,327.44 at 1534 hours.

In the futures market, crude oil for January delivery touched an intraday high of Rs 3,831 and an intraday low of Rs 3,791 per barrel on MCX. So far in the current series, crude has touched a low of Rs 3,130 and a high of Rs 3,831.

Crude oil delivery for January eased Rs 3, or 0.08 percent, to Rs 3,799 per barrel at 1536 hours, with a business turnover of 2,496 lots.  Delivery for February gained Rs 29, or 0.76 percent, to Rs 3,821 per with a business volume of 16 lots.

The value of January and February’s contracts traded so far is Rs 298.29 crore and Rs 0.61 crore, respectively.

Trading strategy

Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited

Technically, MCX crude is trading firm above Rs 3,800. We expect another round of volatility near this level, Major support in WTI Crude oil: $48.82 - $44.99, Major resistance: $54.57 - $59.99 Major support for MCX crude: Rs 3,570 – 3,420 and resistance at Rs 3,900-3,970.

Ravindra Rao, VP- Head Commodity Research at Kotak Securities

NYMEX crude was trading 1 percent lower near $51.7 per barrel. Crude has turned mixed as support from Saudi Arabia’s production cuts, tensions over Iran and hopes of a higher US stimulus are countered by the rise in US rig count, recovery in the dollar index and a rise in virus cases. Oil has rallied sharply in the last few days, however, the march has halted amid mixed factors and we could see some profit-taking before it resumes its up move.

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