Crude Oil - Weekly Outlook - July 10, 2021 - Mr. Sriram Iyer, Senior Research Analyst at Reliance Securities
(Time Zone: UTC)
Oil prices ended lower for the first time in 7 weeks in a volatile week.
The crude oil markets were very volatile during the course of the week.
Ultimately, this is a market that looks as if it is continuing to struggle with the OPEC+ shock coming out of the meetings.
The OPEC+ members continued to struggle to come to some type of agreement for production for the rest of the year.
Meanwhile, U.S. producers will start adding supply due to higher prices after months of subdued activity. U.S. production is currently around 11 million bpd, so output has room to increase before nearing the U.S. record of nearly 13 million bpd reached in 2019.
Concerns about the pandemic also kept upside in check.
A resurgent coronavirus forced Japan to declare a state of emergency in Tokyo that will run throughout the Olympic Games. South Korea reported its highest daily tally of COVID-19 cases.
However, further downside was capped after the Energy Information Administration data showed, U.S. crude inventories fell by 6.9 million barrels last week to 445.5 million barrels vs. an expectation of a 4-million-barrel drop.
Gasoline stocks also fell by 6.1 million barrels in the week to 235.5 million barrels, vs. an expectation of a 2.2-million-barrel drop.
Additionally, signs of strong Asian demand from both China and India also strengthened the market.
The market has taken a bit of a breather last and could continue to witness range bound action next week as well due to the uncertainty surrounding future OPEC+ production hikes.
However, investors will fear that of the OPEC+ group could be tempted to abandon output limits that they have followed during the pandemic, potentially flooding the market with supply.
Investors should also be wary of another potential starting point again of another spread of the infection, with Tokyo Olympics going ahead.
U.S. too also saw a big jump in cases last week and with the more transmissible Delta variants, there will be a cause of concern globally and what another wave will do the global economic recovery.
Investors will also await inventory data next. Over the past 3 week, the markets have been witnessing constant draws and another draw will also lend support to prices.
On the charts, WTI Crude Oil will continue its bullish momentum in coming week where resistance is at $74.80-$76.30 levels. Support is at $72.80-$71.90 levels.
Domestically, MCX Crude Oil holds a support near 5485-5400 levels. Resistance is at 5600-5780 levels.
Strategy: - Crude Oil July: - Buy on dips near 5500 with a stoploss at 5450 and a target at 5600.
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