Crude Oil Gains as the United States Bolsters Sanctions Program Targeting Russian Crude Oil

Crude oil experienced a strong and notable surge of 5.26%, closing at 7,259 points. The primary catalyst for this impressive upward movement was the United States' decision to further tighten its sanctions on Russian crude oil exports. These heightened sanctions have raised concerns about supply levels in an already constrained market, particularly as global inventories are projected to decrease during the fourth quarter. The U.S. sanctions specifically target owners of tankers transporting Russian oil with prices exceeding the G7's price cap of $60 per barrel. These sanctions aim to eliminate any potential loopholes in the system designed to penalize Moscow for its actions in Ukraine.

In a distinct context, OPEC has maintained its outlook for growth in global oil demand. This optimistic view is based on observations of a resilient global economy this year and expectations of continued increases in demand, particularly from China. Simultaneously, the United States has achieved a record level of crude oil production, reaching an impressive output of 13.2 million barrels per day. This milestone surpasses the previous peak established in 2020, just before the COVID-19 pandemic profoundly impacted oil demand. It is noteworthy that this record U.S. output coincides with Saudi Arabia and Russia's decision to extend their voluntary supply cuts, going beyond the agreed-upon OPEC+ production limits. The week ending on October 6 witnessed U.S. oil production reaching 13.2 million barrels per day, marking the highest level since March 2020.

Taking a closer look at the technical aspects, the market witnessed significant short covering, resulting in a substantial decrease of -43.89% in open interest, which ultimately settled at 5,356. The positive momentum led to a price increase of 363 rupees. As for the support and resistance levels for crude oil, the key support levels are now at 7,054 and 6,850. On the other hand, resistance is anticipated at 7,370, with potential for prices to test higher levels at 7,482.

In summary, crude oil experienced a remarkable surge in price, largely attributed to the United States' intensified sanctions on Russian crude oil exports. These sanctions have introduced concerns regarding supply in an already tight market, particularly as global inventories are predicted to dwindle throughout the fourth quarter. Simultaneously, OPEC remains optimistic about global oil demand, noting the resilience of the world economy and anticipating increased demand, particularly from China. On the production front, the United States has reached a new record in crude oil output, exceeding the previous peak recorded in 2020 prior to the pandemic-induced drop in demand. This achievement coincides with Saudi Arabia and Russia's decision to extend voluntary supply cuts above OPEC+ limits. From a technical perspective, the market observed short covering, leading to a significant decrease in open interest and a notable increase in crude oil prices. The support and resistance levels indicate the market's potential trajectory, offering valuable insights for traders and investors.