The new year has begun on a positive note for crude oil. Prices have surged over 15 per cent so far this month. This has come as a relief after prices tumbled in the last quarter of 2018. The crude oil futures contract on the New York Mercantile Exchange (NYMEX) has sky-rocketed 16.5 per cent this month, recovering almost all the losses of December 2018. The NYMEX Crude Oil contract is currently at $53 per barrel.

At home, the crude oil futures contract on the Multi Commodity Exchange (MCX) has surged 20 per cent this month and is currently trading at ₹3,806 per barrel.

Weakness in the Indian rupee has helped the MCX prices outperform the NYMEX prices over this period.

Outlook

The short-term outlook remains positive for oil. The NYMEX-Crude Oil ($53 per barrel) contract has an immediate support at $52. The next significant support is at $50. As long as the contract trades above $50, the outlook will stay positive.

Also, there is an inverted head-and-shoulder pattern visible on the daily chart. This is a bullish reversal. The neckline support of this pattern is also poised in the $52-$50 region. As such there is a strong likelihood of the contract sustaining above $50 in coming days.

Immediate resistance is at $55. A strong break above it can take oil prices higher to $57 and $58 in the near term. A strong break above $58 will then increase the likelihood of it targeting $61 over the short term.

The bullish outlook will get negated only if the NYMEX contract breaks below $50. In such a scenario, a fall to $48 or $48 thereafter cannot be ruled out.

The MCX-Crude Oil (₹3,806 per barrel) futures contract has support in the ₹3,750-₹3,700 region which is likely to limit the downside in the near term. An upmove to ₹4,000 and ₹4,100 looks likely as long as the contract trades above ₹3,700. A further break above ₹4,100 will then pave way for the next target of ₹4,300.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

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