By Bhavik Patel
Crude oil was on its merry way down last week but the weekend attack by Hamas on Israel changed everything. We saw crude open gap up by around 4% but after that it had failed to cross its Monday’s high and 7250 seems to be immediate resistance for now. Market is confused as to which direction it should go as it is stuck between 7250-6800 in MCX.
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The premium that was build up when the Hamas-Israel conflict began is slowly eroding away. Further if the conflict remains between Israel and Palestine, then we believe crude will slowly move down. If however any fresh sanctions on Iran happen, then we may see prices jumping because at around three million barrels per day, Iran is proving to be this year’s key marginal supplier of oil. Further geopolitical risk premium could be built into crude should sanctions against Iranian crude be enforced more vigorously or any more direct form of response take place.
As mentioned above, Crude has strong resistance around the zone of 7250 and we would advice to take long position only above that level. Crude right now seems to be stuck in range of 6800-7250 and any breach below 6800 could see prices declining till 6500. However downside also seems to be limited because of Middle East geopolitical tension and there are chances of escalation increasing. So we would not rule crude out to see lower levels. So next week, one can wait for crude to breach its strong resistance of 7250 and only above that, one can go long with expected target of 7500 and stoploss of 7100.
(Bhavik Patel is a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)
