Commodity prices traded weak last week with Gold and Silver prices paring previous gains while base metals traded under pressure on demand growth worries. Commodity prices traded lower on stronger dollar over US stimulus hopes and surging virus cases in Europe. The greenback ended 0.67 percent up for the week at 93.68 against major currencies. Crude oil prices were the exception which ended in green for the week.
Benchmark NYMEX WTI crude oil prices traded higher for the week gaining by 0.69 percent to $40.77 per barrel as on Friday. Crude oil prices traded firm throughout the week on improved demand prospects from China and India. The bullish weekly inventory data on Thursday supported oil prices to extend gains on Friday. At MCX, Crude oil October futures rallied by more than 1 percent to Rs 2,995 per barrel supported by strong global oil prices and a weaker rupee.
Crude oil prices have held a steady trading range of $37-42 per barrel since the last few months over mixed fundamentals. Oil prices have capped upside limited on slower demand recovery amid COVID-19 pandemic effects and oversupply scenario. Global crude oil inventories have ballooned in the last two quarters over lockdown effects and shutdown in economic activities. The return of supply from Libya and Iraq which are not part of output quota may keep the oil market flooded for the medium-term. The oil production from Libya has reached 5,00,000 barrels per day after a truce with rebel forces.
OPEC plus nations have signalled to ease oil output cut quota by 2 million barrels per day from the current limit of 7.7 million barrels per day. OPEC plus nations have called for strict compliance to output quota to balance the oil market. The higher supplies and surge in the second wave of virus infections in Europe and other parts of the world without vaccine hopes may impact crude oil prices in 2021.
The US CFTC data showed that money managers have decreased their net long positions to five-week low by 9062 lots last week. The oil and gas rigs operating in the Gulf of Mexico were up by 13 to 282 while oil rigs rose by 12 to 205 last week.
Crude oil prices are expected to trade in a current range with bullish bias in the coming week with near-term resistance at $41.50 per barrel. A break above $41.50 may lead prices towards $43 per barrel. The downside is expected to be capped at $37 as it is a strong support zone. At MCX, Crude oil October contract will expire on Monday hence MCX Crude oil November futures support lies at Rs 2,890/2,790 per barrel with resistance at Rs 3,170 per barrel for the coming week.
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