Trading position (short-term; my opinion; levels for crude oil’s continuous futures contract): Those entering the market now can do so by holding long positions with entry at $63-63.5, with $59.7 as a stop-loss and $68.20 as the initial price target.

Oil presented a brief profit booking opportunity when it crossed $66.5. Now it has fallen back – is keeping a higher target price the right strategy then?

Covid-19 new daily cases in India touched a new high of 0.412 million on Thursday (May 6). Oil prices which were on a rally during the early part of this week pulled back. It seems we have to wait to see the peak of daily new cases in India, and, accordingly, demand recovery is pushed further. Adding to the count of similar woes, Japan has decided to extend the current state of Covid-19 emergency by 20 days until 31 May.

There is more and more certainty of vaccine efficacy each day, as countries with advanced vaccination drives are consuming more oil distillates. The UK has vaccinated at least half of its population so far. In correlation, the fuel sales at gas stations have increased and are at the highest levels since lockdowns began last March.

In the absence of any other positive news in the past couple of days, the next price surge can be expected only if Asia signals a reduction in virus impact. Otherwise, we may hover around $65 levels for a few more days before shooting for $70.

To summarize, oil will keep showcasing the push-pull behavior in the coming weeks. Hence, profit booking at small margins is the way forward. The next big rally will be driven only by a significant drawdown in Covid-19 cases in Asia.

As always, we’ll keep you, our subscribers, well-informed.

Trading position (short-term; my opinion; levels for crude oil’s continuous futures contract): Those entering the market now can do so by holding long positions with entry at $63-63.5, with $59.7 as a stop-loss and $68.20 as the initial price target.

Thank you.

Nishant Jain, MBA, CPSM
Oil Trading Strategist