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Mideast turmoil & drop in US stockpiles set to take WTI crude back to $70

Tensions in West Asia supported oil with crude oil witnessing a gapup opening on Monday.

Last Updated: Jan 06, 2020, 08.51 PM IST
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Commodity Summary

Crude oil prices spiked after the US airstrike in Baghdad killed top Iranian commander last week. Weekly inventory data from the US last week also surprised the market with record 11.5 million barrel decline in crude oil inventories, which was four times more than analyst expectations. However, rise in distillate and gasoline stocks neutralised the effect of decline in US stockpiles.

Brewing tensions in West Asia supported crude oil with the commodity witnessing a gapup opening on Monday. WTI prices opened at $64.50 per barrel while Brent crossed the $70 level. Prices at MCX also crossed the Rs 4,650 level.

In case of Iran’s retaliation the suppy in the region might get disrupted. The area is a major oil supplier to the world and persisting tensions could bring WTI crude price back to the $70 level. We expect prices to remain firm till the time tension remains in the region.

Technical chart
(Source: investing.com)

Technical view
Crude oil has been in a continued upward trend since September. It started moving higher from the lows of Rs 3,622 and currently trades at the Rs 4,652 level. The commodity has gained more than 1,000 points in the last three and a half months.

On Friday, it gave the breakout above Rs 4,500 on a weekly basis, which confirms the firmness of the trend. Looking at the weekly technical chart, oil is forming a ‘W’ pattern, which will be confirmed after it closes above Rs 4,680.

On the domestic front, we expect crude oil prices to remain firm in the short to medium term and traders can buy above Rs 4,680 or in the decline around Rs 4,400-4440, with a strict stop loss below Rs 4,200 for the target of Rs 4,940-5,120 in the coming sessions.

(Investors are advised to consult financial advisers before taking an investment calls based on these observations)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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