Derivatives

MCX futures could touch ₹10,000-mark

The OPEC+, in its latest meeting held last week, decided to up the production by about 200,000 barrels a day i.e., they will carry out a production increase of 648,000 barrels a day in July and August. While this in general is expected to ease the supply, experts believe that the production increase is spread across its members who are already struggling to increase output to their earlier lower targets. So, the market is not convinced that the production rise will be achieved to the level which could bring down the supply deficit. The prices remained at the elevated levels.

As a separate development, the European Union could not take Hungary on board in banning Russian oil.

Overall, the upside risk remains, and the crude oil price is likely to remain at higher levels, at least in the near-term.

Brent futures ($119.72)

The continuous Brent futures contract on the ICE extended the gain for the third week in a row as it closed at $119.72. Although the gain is minor when compared to previous week’s close of $119.43, the contract recovered after a mid-week slump strongly, showing inherent bullishness.

Thus, it stays above the key level of $115 and the breakout of the range of $100-115 is likely to sustain. This would mean more potential on the upside in the coming days and weeks. The contract is likely to retest the prior high of $123.74 in a week or two. As the bulls looks strong, a breach of this level is a likely scenario. In such case, it can touch the lifetime high of $139.13.

On the other hand, if the contract falls below $115, there may be a short-term weakness where the price could moderate to $110 and then possibly to $100. But this is a less probable event and break below $100 may not happen anytime soon.

MCX-Crude oil (₹9,235)

The crude oil futures on the MCX posted a gain of 3.8 per cent last week as it closed at ₹9,235 versus preceding week’s close at ₹8,897. Even though there was a decline in price in the first half of last week, it made a good recovery and ended the week on a positive note. Thus, the contract has decisively breached the ₹9,000-mark and notably, it has rallied for six straight weeks.

Given the current impetus, the crude futures appear to give more gains in the coming days. It has the potential to test the crucial ₹10,000-mark although there can be a pause at ₹9,500 level. Therefore, traders can remain long on crude futures. We recommended long positions with stop-loss at ₹8,000 last week. Traders can continue to hold them for a target of ₹10,000. Yet, as a risk management measure once the price is above ₹9,500 tighten the stop-loss to ₹8,600.

On the downside, the price level of ₹8,600 and ₹8,000 can offer good support.

Published on June 04, 2022