Weekly Outlook on Crude Oil - 29 December 2023

In 2023, crude oil faced a rollercoaster of challenges, marking its first annual decline in two years. Geopolitical tensions, production cuts, and global efforts against inflation caused wild price swings. Despite a recent stabilization, oil prices are set to end the year about 10% lower, reaching levels not seen since the pandemic-hit 2020.

The disruption of the Red Sea route due to Yemen's Houthi militant group added to the uncertainties, leading to a 3% drop in oil prices. Major firms adjusted their shipping routes in response. OPEC+ production cuts aimed at stabilizing prices proved insufficient, with benchmarks declining nearly 20% from their peak in 2023.

The U.S. Energy Information Administration reported a much larger-than-expected draw in U.S. crude oil inventories last week. Oil stockpiles fell by 7.1 million barrels, while analysts polled by Reuters had expected a draw of 2.7 million barrels.

MCX Crude oil prices recently dropped over 2% and are hovering near the psychological level of 6000. They've been trading below the 61.8% Retracement Levels with a negative RSI crossover. However, the prices are still above the 200-week SMA and trendline support on the weekly scale. Significant support lies at 5820/5650, while resistance levels are at 6350 and 6500.

Currently, the price appears to be moving sideways, and a breakout in either direction is awaited. Traders are advised to monitor developments in the Red Sea and inventory data for better insights into future price actions.

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