Crude oil likely to hit $80/bbl mark in 2018; 10 stocks which are likely to get impacted the most

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The rally which started in the crude oil price may not be over yet. Most experts tracking the commodity sees it heading towards $80-90/bbl in the next two years.

The crude which was trading around $50/bbl at the beginning of the year 2017 climbed to $68/bbl in the first week of January 2018, resulting in a rally of over 20 percent in the crude oil prices in the last one year.

Higher oil prices do pose a concern for fuel importing countries like India which would have an adverse impact on the economy as well as companies which used crude as part of the raw material in their product.

The rally which started in the crude oil price may not be over yet. Most experts tracking the commodity sees it heading towards $80-90/bbl in the next two years.

The rise in global crude prices is backed by output cut by OPEC & Russia, freezing weather in the US which has fuelled demand for heating oil. Strong economic data from major economies, and falling crude oil inventories coupled with Middle East tensions will keep the commodity on trader’s radar.

“We maintain our bullish view on Brent crude oil prices and expect the prices to trade between US$80-90/bbl during the next two years. Our positive bias on crude is mainly supported by OPEC’s (along with Russia, non-OPEC member) decision to maintain production cuts throughout 2018 which will partly balance demand-supply situation,” Sumit Pokharna, Deputy Vice President Research at Kotak Securities told Moneycontrol.

“Apart from that declining US crude inventory levels, rising global oil demand, seasonal factors (winters), higher refining margins leading to higher crude demand from refiners, large speculative position building up, geopolitical concerns, etc. are all contributing to higher crude oil prices,” he said.

Even the domestic fuel prices have been steadily rising for several months as global crude prices have soared almost 40 percent in the last few months. The rise in crude oil prices has a bigger implication for India – first, it does put a strain on countries current account deficit, and the other major worry is that it leads to rise in inflation.

“Higher oil price is posing a concern as a continuous rise in crude oil price is expected to have adverse macroeconomic implications. It may not just fuel inflation, but may also deteriorate the twin deficits (current account deficit and fiscal deficit),” D.K. Aggarwal, Chairman and Managing Director, SMC Investments, and Advisors told Moneycontrol.

“As RBI is already keeping a close eye on inflation, it may give limited room for RBI to slash rates in coming months and this may affect corporate profits, even turn the investment sentiment negative,” he said.

Technical View:

Crude oil formed an inverse Head and Shoulder Pattern on the weekly chart, which is a bullish pattern. The pattern is formed on the weekly chart, which indicates that crude could be in a medium to long-term bull run.

“The immediate support comes around $55 followed by $52, which could hold any dips in the prices. Medium-term Supports are around $42/40,” Priyank Upadhyay, AVP Commodity Research at SSJ Finance & Securities Pvt Ltd told Moneycontrol.

“Prices are also trading well above the 8,20 and 50 week moving averages which indicates positive momentum to continue. From the above analysis, we see prices could head higher towards our minimum target of $68 and the inverse head and shoulder pattern targets come around $80,” he said.

Source: 
moneycontrol
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