Weekly Outlook on Crude Oil - 13 October 2023

Crude oil prices experienced a significant rise on Friday following the United States' decision to strengthen its sanctions against Russian oil exports. This move heightened supply concerns in an already tight market, with global inventories expected to decline throughout the fourth quarter.

Despite fluctuations earlier in the week, both Brent and WTI are poised for weekly gains, with Brent set to climb 3.3% and WTI 2.9%. The initial surge on Monday was fueled by concerns of potential disruptions to Middle Eastern exports, triggered by Hamas' weekend attack on Israel, which raised fears of a broader conflict.

Crude Oil Prices Surge as U.S. Tightens Sanctions on Russian Exports amidst Supply Concerns

On Thursday, the U.S. imposed sanctions on owners of tankers transporting Russian oil priced above the G7's $60 per barrel cap. This action aimed to close loopholes in the mechanism designed to penalize Moscow for its invasion of Ukraine. As Russia stands as the world's second-largest oil producer and a major exporter, heightened U.S. scrutiny could potentially limit the global oil supply.

Simultaneously, the Organization of the Petroleum Exporting Countries (OPEC) maintained its forecast for growth in global oil demand on Thursday. OPEC cited signs of a resilient world economy throughout the year and anticipated further demand increases in China, the world's largest oil importer. The geopolitical and economic landscape continues to play a pivotal role in shaping the trajectory of oil prices in the coming weeks.

In the daily perspective, MCX crude oil exhibited a mild recovery from the week's low, successfully maintaining a position above the crucial 7000 mark. The current status indicates that prices are holding resiliently above the 100-days Simple Moving Average (SMA) support zone, though they remain positioned below the Rising Trendline. A momentum indicator Relative Strength Index (RSI-14) experienced a positive crossover, signifying a potential upward momentum. Furthermore, price action found support at the lower Bollinger Band formation.

In additions, both WTI crude oil and Brent oil demonstrated substantial gains during the Friday session, with both counters marking almost 3% increase from the previous day's low. Evaluating the present combination of fundamental and technical factors, an anticipated upside move in MCX crude oil is on the horizon.
 

Hence, traders are recommended to consider buying opportunities in the range of 6930 to 6980 levels. The immediate target for this potential upward movement is set at 7250, with a further target at 7370. To manage risk effectively, a strict stop-loss (SL) at 6700 on a closing basis is advised. It's crucial to note that a breach of this level would negate the buying view. Traders are urged to exercise vigilance and strategic decision-making in line with the evolving dynamics of the MCX crude oil market.

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