Commodity Radar: Crude oil’s 3-month run raises profit-taking calls. Sell on rise

Crude oil prices were in the green zone on Wednesday, taking cues from the trends in the international market. The prices have been under pressure on the back of OPEC’s agreement to increase oil output from September. Moreover, lower-than-estimated US payroll data has also raised concerns over the economic situation in the world’s largest economy.

The MCX August oil futures were trading at Rs 5,762 per bbl, up by Rs 14 or 0.24% over the Tuesday closing price. Meanwhile, on the COMEX, crude oil futures were hovering around $65.58, up by $0.42 or 0.64% and the Brent oil contracts were trading at $68.09, up by $0.45 or 0.67%.

Commenting on the current trends, Naveen Mathur, Director – Commodities & Currencies, Anand Rathi Shares and Stock Brokers said that the softer jobs data coupled with OPEC’s aggressive output hike decision has put pressure on the oil prices.

“In July, crude oil closed higher for the third straight month but got stuck in a broad trading range of $65–$70 per barrel, as low inventories, declining rig counts, and geopolitical tensions offset economic slowdown fears. WTI ended the month up 6.4% at $69.26, while MCX crude gained 8.4% as rupee depreciation added to the gains in the India market,” Mathur said.

Russian Crude sanction threats have lifted the supply premium, with President Donald Trump’s repeated threats of 100% secondary sanctions on China and India.

Up to 2.75 million bpd of Russian oil is at risk, this analyst said, adding that there isa possibility of U.S. action on Russian oil, including secondary sanctions from August 8.OPEC+ approved a 547,000 bpd output hike for September, completing the reversal of 2023 cuts ahead of schedule, but left the fate of another 1.66 million bpd offline supply uncertain. The move adds pressure on an already fragile market, risking a Q4 surplus. “Heading into August, markets eye OPEC+’s final output hike in September, with a pause expected till 2026 as the group assesses U.S. tariffs and China’s weak economy. Meanwhile, Trump’s 25% tariff on Indian goods and penalty threats over Russian oil imports have rattled Indian refiners, potentially tightening global supply if Russian crude flows are disrupted,” Mathur said.

With U.S. oil stockpiles near 5-year lows and rig counts falling, supply pressure may ease. However, with summer demand fading, prices may stay in check unless fresh geopolitical shocks arise.

Technical view

MCX crude oil is currently trading below its 200-day moving average at Rs 5,900, indicating a bearish undertone, and if the prices stay below this level, further downside momentum could emerge, Mathur said, with immediate support seen near Rs 5,580.

Technical indicators like MACD and RSI are also signalling bearishness.

Trading strategy

The overall trend remains weak, and the market is expected to stay range-bound between Rs 5,500 and Rs 6,000, the Anand Rathi analyst said.

Mathur recommends a sell-on-rise strategy on MCX crude oil contracts with short positions around Rs 5,850, a stop loss of Rs 5,950 and targets of Rs 5,600 and Rs 5,500.

On the international front, WTI crude is struggling near $65.50, showing a sideways-to-bearish bias, and is likely to trade within the $64 to $68 range.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)