Oil prices have fallen around 5 percent during this week as Libyan ports reopen and amid hopes that Iran will still export some crude despite US sanctions.
Crude Oil approached $75 a barrel in July due to Libyan and Venezuelan supply disruptions and fears the United States would press all buyers of Iranian oil to cut imports to zero from November.
However, prices weakened in recent days as OPEC member Libya reopened its ports in the east and U.S. Secretary of State Mike Pompeo said Washington would consider granting waivers to some of Iran’s crude buyers.
Crude also slid amid broader market fears that a US-China trade dispute could hit global economic growth. The International Energy Agency (IEA), however, raised expectations for a global shortage in crude supplies on Thursday as the energy watchdog warned of a potential capacity crunch amid a rise in output from Middle East Gulf countries and Russia.
Crude oil prices fell by about 5% this week as Libyan ports reopen
Rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world’s spare capacity cushion, which might be stretched to the limit.
The number of active US rigs drilling for oil rose by five to 863 last week. Although that was the first increase in three weeks, the US rig count, an early indicator of future output, is much higher than a year ago when 763 rigs were active as energy companies have been ramping up production in tandem with OPEC’s past efforts to cut global output over the past year-and-a-half.
From the weekly chart, we can see prices are making higher highs and higher lows since the start of 2018 which indicates bullish trend.
Prices have moved northwards from Rs 4,000 to Rs 5,170 on the MCX from the start of February. This week we saw prices corrected from Rs 5,170 towards Rs 4,750.
Crude took resistance from the upper Bollinger band and even on RSI we could see there was a negative divergence which all indicated prices could come under some pressure in the near future.
Now, this correction could find support towards the upward sloping trend line (T2) which is placed at Rs 4,550 and even at 20-week SMA which is placed at Rs 4,500.
In the short term, we expect prices to remain in a broad range of Rs 5,170 to Rs 4,500 with a negative bias and prices could test Rs 4,600/4,550 zones.
The near-term resistance will be seen at Rs 4,950/5,100 zones and as long as Rs 5,200 is not surpassed on the higher side we could see prices correcting towards Rs 4,600/4,550 levels in the short-term from there we could see a bounce higher again.