After a two-week sluggish performance, crude oil witnessed a solid rebound last week. While the Brent crude futures on the Intercontinental Exchange (ICE) rallied 3.9 per cent to close at $87.8 a barrel, the MCX crude oil futures (September contract) surged 8.6 per cent to end the week at ₹7,064 per barrel.

The rise was triggered by reports that Saudi Arabia could extend the production cut of 1 million barrels per day into October as well. Besides, Russia also hinted to undertake further cuts in production.

Moreover, the US crude oil stockpiles dropped significantly. The Energy Information Administration (EIA) data shows that the crude oil stocks declined by 10.6 million barrels for the week ended August 25. The market was anticipating a lower 2.2 million barrels draw.

The charts, too, reflect a similar positive tone hinting at further increase in the prices.

MCX-Crude oil (₹7,064)

The September futures of crude oil gained in all five sessions of last week, indicating strong upward momentum. Importantly, the contract has now clearly breached the barrier at ₹7,000 and supposedly, this can invite fresh buying.

Although ₹7,200 can resist the bulls, it is not expected to hold for long. The crude oil futures can surpass this level and the destination of the rally that picked up momentum last week appears to be ₹7,600. Since ₹7,600 is a considerable resistance, we might witness some profit booking leading to a possible correction in price.

A breakout of ₹7,600 can open the door for an upswing to ₹8,000.

In case there is a price correction from the current level, the contract might dip to ₹6,900. But eventually, the crude oil futures can resume the uptrend and move up to ₹7,600 in the short term.

Trade strategy: The target of ₹6,900 for the longs that we recommended at ₹6,500 last week did hit on Friday.

Since there is scope for further upside, traders can buy now at around ₹7,064 and add longs in case the price dips to ₹6,900. Place stop-loss at ₹6,720 at first. On a rally to ₹7,400, tighten the stop-loss to ₹7,180. Exit at ₹7,580. 

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