After a sharp sell-off in recent weeks, crude oil prices stabilized last week, forming a base for a possible rebound. According to The Hindu BusinessLine, Brent crude oil futures on the Intercontinental Exchange (ICE) settled at $72.10 per barrel, while crude oil futures on the Multi Commodity Exchange (MCX) for July delivery closed at ₹6,568 per barrel. Both contracts posted modest losses of 0.7% and 0.1% respectively.
Price Action and Support Levels
Brent crude futures dropped to a five-month low of $70.14 on Thursday, July 2, according to the report. However, the fall was measured and the movement over the past week shows that the bears have lost momentum. The support at $71 is helping Brent crude futures in the fight against the sell-off. While a bullish reversal in trend is not imminent, a corrective rally is likely. The uptick could lift the contract to $80. A breakout above $80 could further lift it to $86. Conversely, if the contract breaches the support at $71, the downtrend could extend to $65.
Domestic Market Dynamics
On the MCX, crude oil futures (July), which have been in a downtrend, found support at ₹6,400. While there was no recovery last week, the contract largely stayed sideways. Since Brent crude futures is hovering near a considerable support and is likely to rebound, MCX crude oil futures can also rise. The upswing can take the contract to ₹7,300, its 21-day moving average. A rally past this level can take it higher to ₹8,100. On the downside, if crude oil futures slip below the support at ₹6,400, it could lead to another downswing, possibly dragging the price to ₹5,800. Support below ₹5,800 is at ₹5,500.
Trade Strategy
In line with the technical outlook, the report recommends a buy-on-dip strategy. Last week, the report recommended buying crude oil futures at ₹6,577. Traders are advised to retain this position and maintain a stop-loss at ₹6,350. Profit booking is recommended at ₹7,200.
Key Levels Summary
| Contract | Support | Resistance | Downside Target | Upside Target |
|---|---|---|---|---|
| Brent Crude (ICE) | $71 | $80, $86 | $65 | $80, $86 |
| MCX Crude Oil (July) | ₹6,400 | ₹7,300, ₹8,100 | ₹5,800, ₹5,500 | ₹7,300, ₹8,100 |
Outlook
The technical setup suggests that crude oil prices have formed a base near key support levels. While a trend reversal is not confirmed, the likelihood of a corrective rally has increased. Traders should watch for a breakout above $80 in Brent or a breakdown below $71, which would determine the next directional move. The upcoming data releases, including inventory reports and OPEC+ actions, could provide further catalysts.
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