Internationally, Brent Crude has dipped below the $80 per barrel and is now at 4 year lows. In India, Crude has fallen below the Rs 5000 mark in the futures market, though it is not a 4 year low in India. Crude for April delivery on the MCX is now trading at Rs 4916, while the December Crude Futures is way below that.
Possibility of crude oil prices rallying
There is a possibility that crude oil prices internationally could recover. As the global economic recovery gathers pace, it's likely that oil prices would also rally as has always been the case when economic recovery happens. Secondly, if Saudi Arabia or the OPEC announces cuts in production, it's possible that we could see positive momentum in prices. Also, crude prices at the current levels will make oil from shale and other enhanced oil recovery techniques unviable curbing supply and pushing prices higher.
Also, any global turmoil could push crude prices higher, particularly tensions in Syria and Iraq. Increased activity by the Islamic State could also push global crude prices higher.
Should You Buy Crude Futures at the Current Price?
Crude for April Delivery on the MCX in India is trading at around Rs 4916. At the current market price on the MCX it may be a good buy, as there could be a rebound in crude prices in the international markets in the next few months as explained above. An April settlement would give an opportunity of around 5 months from now, by which time one can expect positive momentum simple because crude oil has fallen dramatically in the last few days.
Also, any further depreciation in the rupee against the dollar could push prices on the MCX higher.
Equity markets across the globe have rallied sharply, while crude and gold have fallen as investors keep chasing stocks at higher levels. Buying equities at the current levels could pose some risk, especially since they have run-up sharply. Crude prices on the other hand on the MCX having fallen sharply and at under Rs 5000 for an April 2015 contract remains a good bet.