Crude oil at 3-year high, WTI may cross $70 mark soon

By Manoj Kumar Jain

Crude oil prices settled at a three-year high in the previous week, with WTI finishing at $ 68.40 per barrel and Brent at $ 74.06.

There was some profit booking after a tweet from US President Donald Trump suggested that OPEC is keeping oil prices artificially high. Saudi Oil minister fired back with a quick reply, suggesting prices are not inflated and the market is rebalancing the global output.

The meeting of joint OPEC and non-OPEC ministerial monitoring committee in Saudi Arabia last Friday confirmed compliance with a deal to cut output at its highest ever, further stoking expectations of a rebalance later this year.

OPEC and 10 producers outside the cartel, including Russia, have been holding back oil output by around 1.8 million barrels a day since the start of last year. The arrangement is set to expire at 2018-end.

OPEC will meet in June to decide whether to extend that production cut deal. The efforts of OPEC members are somewhat stifled by US shale output, which raced to its highest ever 10.54 million barrel per day. US oil rig count increased last week by 4 to hit 820, the highest since March 2015.

We expect that geo-political tensions, OPEC compliance on production cuts and global demand will continue to drive crude oil prices. The prices could move further to go beyond $ 70.

Crude oil price chart



Technical View
Crude oil made a high of $ 69.56 on April 19 in intraday trade before weekly close at $ 68.40 per barrel. Technically, crude is still bullish on the chart and indicates further upside in days to come.

Above $ 67.50 levels, it will set the trigger for more upside at $ 69.30-70 per barrel. Weekly close below $ 67.50 will set off a fresh round of selling in the contract till $ 65.80 and then $ 64.50 per barrel.

At MCX, crude oil settled at Rs 4,531 per barrel in the previous week. Crude oil is having strong support in price zone of Rs 4,470-4,450. If crude oil is able to sustain above Rs 4,450 per barrel, we expect it could rally up to Rs 4,580-4,670-4,800, sustain and close below Rs 4,450. This will trigger selling in the contract which could move down further till Rs 4,370-4,280 levels.

We expect crude oil to show strength, which could be accumulated in the range of Rs 4,470-4,450 with strict stop loss below Rs 4,350 on a closing basis for the upside target of Rs 4,580-4,670-4,800.

Buy Crude oil Rs 4,470-4,450 Stop loss Rs 4,350 (Closing basis) Targets Rs 4,580-4,670-4,800.

(Manoj Kumar Jain is Director of Commodity and Currency at IndiaNivesh Commodities. He has 20 years of experience in financial service sector. Views expressed in this article are author’s own and do not represent those of Readers are advised to consult their financial advisers before taking any position based on these observations)