MCX crude oil September futures support at 6500; US FOMC meet to guide crude oil movement

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The oil market is going through a rough patch as investors continue to grapple with inflation, demand fears and lockdown in China. US CPI which came higher than expected started cascading effect of selling pressure in all commodities including crude. While crude prices have taken a big hit, oil and gas stocks have fared even worse with energy equities experiencing nearly double the selling pressure compared to WTI crude. However recently the selling pressure has abated and WTI is steady at around $85. The market had taken in stride the outlook by IEA for almost zero growth in oil demand in the fourth quarter due to a weaker demand outlook for China however OPEC has forecasted 3.1 million bpd growth for the rest of the year. Sentiment also suffered from comments by the U.S. Department of Energy that it was unlikely to seek to refill the Strategic Petroleum Reserve until after fiscal 2023.

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In MCX, the price is taking resistance at a 20-day moving average since 30th August. It has failed to close or trade higher above the 20-day moving average so the immediate resistance is 7071. Above that, the next resistance is at 7470 where the 200-day moving average and swing high are. On the downside, 6650 and 6500 are the support which was a recent swing low. We don’t anticipate any major trend in crude owing to the news which is both positive and negative and thus counterbalancing the price at the centre. Any major or clear direction is expected after 21st September when the US Fed will give guidance about future rate hikes. Till then, the expected prices to trade in a broader range of 6500-7500.

(Bhavik Patel is a commodity and currency analyst at Tradebulls Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)