Crude Check: Rally may take a breather

Oil prices demonstrated a relatively stable pattern over the past week, with a brief resurgence on Friday. Brent crude oil futures on the Intercontinental Exchange fell by 2.8 percent, halting a four-week climb. Domestic crude oil (Nov) futures experienced a 1.4 percent increase last week, marking the fifth weekly gain in succession.

Brent crude futures started the week with a gap-down, opening at $110.85 on Monday, compared to the previous week's close of $116.72. Initially, the contract fluctuated within a narrow range of $109-112.50 until Thursday. However, on Friday, Brent futures surpassed $112.50, indicating the bulls were outpacing the bears. Despite maintaining an optimistic outlook, the current price movement implies that the contract might remain stagnant in the near future.

This suggests that Brent futures could fluctuate between $106 and $116 for a period before breaking out of this range. A surge above $116 could propel Brent futures to $120 and potentially $130. Conversely, a dip below the support at $106 could undermine the near-term perspective. The upcoming support level below $106 is at $100.

Domestic crude oil (Nov) futures traded within a tight range of ₹9,450 to ₹9,850 for most of last week. On Friday, the contract breached ₹9,850, reaching a new high of ₹9,972 before settling at ₹9,937. Even though the MCX crude oil futures chart appears more bullish than Brent crude futures, a pause in the latter might keep the former contained.

Domestic crude oil futures could experience a range-bound movement in the near term, with potential limits at ₹9,100 and ₹10,200. Nonetheless, the overall sentiment remains bullish. A breakout above ₹10,200 could spark a swift rally to ₹10,500. Resistance above ₹10,500 stands at ₹11,000. Conversely, if the contract falls below the support at ₹9,100, it could prolong the decline to ₹8,500, a critical support level. A breach of ₹8,500 could ignite a fresh downtrend, potentially pushing the contract to ₹7,800.