Feb 10, 2023
Russia cuts crude production, prices correct on USD rally; short Crude March contract with Rs 6620/bbl stoploss
By Bhavik Patel
MCX Crude is trading in the range of 6,350-6,600. This week we had negative, as well as, positive news which kept bulls and bears both active but neither gained any upper hold. Middle of the week, US inventory came larger than expected which prompted sellers in action but prices recovered soon as OPEC and the International Energy Agency raised their demand forecasts for the year, shaking off EIA’s latest weekly inventory report.
Last week, Russia announced a 500,000 bpd voluntary production cut due to growing pressure from price caps and embargoes and Saudi Arabia raised its official selling price for the first time in the last six months which both is positive for crude oil. We believe the correction in crude would continue on the back of a rally in USD as yesterday also Fed members started to increase rates due to persistent high inflation. At the moment those comments from Fed are overshadowing increased demand prediction as well as supply cut which is why crude prices are correcting.
Crude in the MCX March contract had made double top around 6780 and the current rally failed to cross over that level. In fact, the rally only went till 6700 before fizzling out and so 6780 continues to be strong resistance. We believe the correction will continue till 6350 and 6200. 6050 seems to be strong support so any correction around that zone would be an ideal opportunity to go long. Right now one can go short in Crude March contract with stoploss of 6620 and expected downside target of 6300.
(Bhavik Patel, Currency and Commodity Analyst, Tradebull Securities. Views are author’s own. Please consult your financial advisor before investing.)
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