Oil prices rallied last week. Brent crude oil futures on the Intercontinental Exchange (ICE) ($88.50/barrel) and crude oil futures in the domestic market (₹7,810/barrel) gained 5.9 per cent and 6.1 per cent, respectively.
Brent crude futures surpassed a hurdle at $86 early last week. However, it could not extend the upswing as it faced resistance at $91. This barrier appears well positioned and is likely to block the bulls in the short-term.
At the same time, Brent crude futures has support at $86 and $83. Hence, there is a good chance for the contract to consolidate between $83 and $91 in the near-term and the direction of the breach of this band will determine the next trend.
A breakout of $91 can lift the contract to $98 and $100. Whereas a breach of $83 can drag the contract to $78 and $75.
Crude oil futures (Sep) rose above the resistance at ₹7,500 early last week and marked a high of ₹7,975 on Tuesday. However, the resistance at ₹8,000 stood firm and did not allow the bulls to extend the uptick.
The likelihood of a breakout of ₹8,000 is low this week. Also, we might not see a decline since crude oil futures has support band between ₹7,500 and ₹7,400.
Given the prevailing price action, we expect crude oil futures to oscillate between ₹7,400 and ₹8,000 in the near-term.
A breakout of ₹8,000 can lead to a rally to ₹8,600 whereas if the support at ₹7,400 is invalidated, the price can fall to ₹7,000.
Trade strategy: Stay out since the contract can stay sideways.
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