Crude Oil: Resistance Around Rs 6550-6600/bbl Range

MUMBAI: Crude oil prices ended the month in red slipping by more than 4% at MCX as prices slumped after 3 months of rise, primarily weighed down by a stronger dollar and sea-sonal slump in demand. The greenback rose to three-weeks high towards the end of the month supported by a spike in U.S. bond yields, making dollar priced com-modities expensive for holder of other currencies. Weak economic reports from China released throughout the month raised fresh concerns over the strength of the world's second-largest econ-omy weighing on crude prices. Also, Chinese Premier Li Keqiang warned during the month that the economy could face "severe challeng-es" in 2014. Fears over prob-lems in China's financial sec-tor also sapped risk appetite following the country's first domestic bond default this month. Oil prices however got supported during the month after the International Energy Agency raised its forecast for global oil demand this year.

The IEA increased its forecast by 95,000 barrels to 1.4 million a day, citing stronger economic growth. Investors also continued to closely monitor geopolitical tensions in Ukraine through out the month and data from China also showed imports rose 10.1% during February, compared to forecasts for an 8% increase. According to customs data, China's Febru-ary crude oil imports totaled 23.05 million metric tons, down 18.1% from January. The significant decline in China's exports led to a defi-cit of $22.98 billion last month, compared to a sur-plus of $31.86 billion in Janu-ary. Analysts had expected a surplus of $14.5 billion in February. Investors during the month also continued to monitor events in Ukraine, where tension over moves by neighboring Russia in the Crimean region heightened risk in the financial system, hurting riskier assets. Ten-sions between Russia and the West remained high on Crimean crisis as the U.S. and Europe moved closer to impose economic and diplo-matic sanctions on Russia. .Going ahead for next month prices would continue to take further cues from U.S macro-economic data and demand situation from major consum-er China as it would provide further direction to prices.

Crude oil prices extended previous month's range as it surged to break last month's high but failed to hold on to gains, and there by plunged to breach the previous month's low as well. Prices tumbled by around 4 percent r but are currently stuck in an upwards moving range on weekly charts with support seen around Rs 5850/bbl and resistance around Rs 6550-6600/bbl range. RSI (14) is trading around 50 odd levels which is an indication of an equilibrium trading range. Rs 6160/bbl is seen as near term resistance for the coun-ter and if prices manage to breach the same, they can move higher towards Rs 6340/bbl. At NYMEX, crude oil has formed a strong base around $97/bbl and breach of the same may drag it further lower towards $91/bbl in the month going forward.