Crude oil ended last week on a flat note. The Brent crude futures on the Intercontinental Exchange (ICE) closed at $93.4 per barrel on Friday versus preceding week’s close of $93.9 a barrel, whereas the MCX crude oil futures (October contract) ended the week flat at ₹7,473 per barrel.

The demand concerns and the fear of short supply seem to have balanced out each other over the last week and thus, there was no definite trend in price.

In the US, there was a drop in inventory. According to the Energy Information Administration (EIA) data, the crude oil stockpiles in the US dropped by 2.1 million barrels versus the expected drop of 1.3 million for the week ended September 15. However, this failed to lift the prices as demand concerns overweighed.

Nevertheless, the chart remains bullish and there are no signs of a bearish reversal yet. Below is an analysis.

MCX-Crude oil (₹7,473)

The October futures of crude oil now seems to be stuck in the range of ₹7,375 and ₹7,600. So, technically, to confirm the next leg of trend, the contract should breach either of these levels.

If crude oil futures break out of ₹7,600, it can embark on a journey northward that can take the price to ₹8,000 or even to ₹8,300. On the other hand, if the support at ₹7,375 is breached, the price can decline to ₹7,240 – a support. A breach of this level can drag the contract lower to ₹7,000.

Since the overall trend is bullish and there are no clear signs of bears gaining traction, the probability of the contract breaking out of ₹7,600 is high.

Trade strategy: Buy crude oil futures if it breaks out of ₹7,600; initial stop-loss can be at ₹7,300. When the contract touches ₹8,000, tighten the stop-loss to ₹7,850. Book profits at ₹8,200.

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