Why Fuel is likely to get more expensive?

Source: iStockphoto

 

 

Source: TradingView

Above is the price of Brent crude from Jan 18 till date. (Traditionally the benchmark for India’s crude basket imports).

The graph also contains the following-

Light Blue Line- Straight line across- Support/ Resistance Line at around $86.8/ barrel.

Orange Line- Straight line across- Support/ Resistance Line at around $71.1/ barrel.

Light Purple Line- Across graph- 50 Day Moving Average (50DMA)

Dark Purple Line- Across graph- 200 Day Moving Average (200 DMA)

Red Arrows- Point of Resistance- Points 1 to 6.

Green Arrows- Points of Support- Points 7 & 8.

Along with this two regions have been circled. Circles A & B.

 

Source: TradingView

Going from left to right

In point 1, around Sept 2018, Brent crude struggled to cross the resistance line at $86.8. After which the price broke down and then struggled to cross the resistance line at $71.1in points 2 & 3 which correspond to May 2019 and Dec 2019 respectively.

After this we had the covid break down where the price of crude oil crashed (it was negative in the futures market).

 

Source: TradingView

Circle A corresponds to the period in Nov 20. Markets had picked up and the worst of the covid crash was over. Note that the 50DMA line crossed the 200DMA line. This is a classic bullish signal.

It tested the resistance in March 21 (point 4). After which it broke out of the resistance line at $71.7 and tested the higher resistance line at $86.8 (point 5) in Oct 21.

The price of crude decisively crossed the resistance at $86.8 in late Jan 22. The Ukraine crisis triggered in Feb 22. Prices of crude shot up all the way to $137 at its highest in March 22.

Post this the price of crude started falling quite precipitously following recession fears across the globe. Interestingly the price of crude found a support at the support/resistance line of $71.1 to the barrel. These are points 7 & 8 in the graph corresponding to April 23. In the interim, the price did try to break through the other support/ resistance line at $86.8.

 

Source: TradingView

Now, in circle B you will notice that the 50DMA is about to cross the 200 DMA. This is also close to the resistance line at $86.8. These are bullish signals for the price of crude. We should expect the price of crude to go up from here. In other words, petrol is probably going to get more expensive.

 

 

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Source: iStockphoto