By Bhavik Patel

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China reported 23,276 new covid cases on Wednesday, its National Health Commission said on Thursday, compared to 20,199 a day earlier. On top of that, JP Morgan’s forecast this week that the United States will enter a recession next year thanks to the Fed’s continued rate hikes, dampening the outlook for oil demand. US shale production has also surpassed pre-covid levels but there is some silver lining for crude. Supply side will remain vulnerable as OPEC+ are going to cut their production further to boost the price. So in the short to medium term, we may not see sharp recovery on the upside but we may see price coming close to bottom. Another reason for bulls to cheer is that EU will put oil embargo to Russia on 5 Dec. OPEC+ may overtighten the market, in view of the huge uncertainties surrounding Russian oil supply in just three weeks time.

For next week, Crude Dec contract in MCX has support in range of 6500-6300 which was previous swing low made around Sept. We have already seen sell crossover of 20 and 50-day moving average while momentum oscillator RSI_14 is around 38 showing there is further room on the downside. Participants might be tempted to go long looking at price correction however there aren’t any indication on daily chart of trend reversal so one should wait for any bottom formation before taking long position. Short position holders can take profit off the table. Next week any correction in range of 6600-6500 should be utilized to go long for intraday purpose with stoploss of 6400 and expected bounce back till 6800. 

(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.)