Oil hits four-year low on US-China trade war, Brent, WTI slump 16% in one week: How to place bullish bets on MCX crude?

Oil prices plunged as much as seven per cent on Wednesday, April 9, hitting fresh four-year lows before recovering some ground after China announced additional tariffs on US goods in retaliation against US President Donald Trump's tariff policy. China said it will impose 84 per cent tariffs on some US goods starting Thursday, up from the previously announced 34 per cent.

Crude oil has lost about one-fifth of its value since Trump announced higher tariffs on a range of US trading partners on April 2, the biggest five-day drop since March 2022. Brent crude index crashed below $60-barrel on Tuesday.

Also Read: US Tariffs on Pharma: Dr Reddy’s to Sun Pharma—can Indian drugmakers escape Trump’s tariff tantrums?

Crude oil prices trend

Brent futures were last down $2.47, or 3.9 per cent, to $60.35 a barrel. US West Texas Intermediate (WTI) crude futures were down $2.35, or 3.9 per cent, at $57.23. Both contracts lost about seven per cent before paring losses. The two crude oil benchmarks have slumped by nearly 16 per cent since Donald Trump's April 2 announcement of tariffs on all US imports.

Back home, crude oil futures last traded 2.41 per cent higher at ₹5,322 per barrel on the multi-commodity exchange (MCX). During Wednesday's session, MCX crude futures hit an all-time record low of ₹4,798.

Also Read: Goldman Sachs slashes crude oil price target by 5.5% amid tariff woes after Brent, WTI hit four-year low on OPEC+ supply

The MCX benchmark pared losses and hit an intraday high of ₹5,324 per barrel, up from a previous close of ₹5,197. MCX crude futures currently trade 18.4 per cent lower than their record high of ₹6,525 per barrel.

What's dragging crude oil prices?

-Trump's 104 per cent tariffs on China kicked in from 12:01 a.m. EDT on Wednesday, ratcheting up duties after Beijing failed to lift its initial retaliatory tariffs on US goods. Countermeasures over trade in Canada, a major US trading partner, took effect on Wednesday.

-On Wednesday, European Union countries agreed to impose 25 per cent tariffs on a range of US imports in a first round of countermeasures. Brent and WTI have fallen for five sessions since Trump announced tariffs on most imports, prompting concerns over economic growth and fuel demand.

-A decision last week by the Organisation of Petroleum Exporting Countries (OPEC) and its allies to raise output in May by 411,000 barrels per day, which analysts say will likely push the market into surplus, limiting oil's gains.

-Goldman Sachs now forecasts that Brent and WTI could be at $62 and $58 a barrel respectively by December 2025 and $55 and $51 by December 2026. Morgan Stanley lowered price forecasts for Brent crude by $5 a barrel to $65 for the second quarter, $62.50 for the third quarter and $62.50 for the fourth.

Also Read: Crude oil prices hit four-year low on recession fear, Trump’s tariffs, Saudi Arabia’s rate cut

Crude oil at four-year low: How to place bullish bets on MCX crude?

According to Gyan Ranjan Singh, Commodity Analyst, Choice Broking, “Recently, the price of crude oil on the MCX fell to a four-year low, breaking through a significant long-term support level. The technical situation is now negative with a descending triangle breakdown and the price trading below all significant weekly moving averages," said Ranjan Singh.

Although the oversold zone raises the prospect of a brief recovery, a rise in volume during the breakdown and an RSI reading close to 21 indicate a strong bearish sentiment. According to Singh, the next crucial level is at 4,666, and the 4,870–4,800 area provides immediate support.

Also Read: Crude oil prices could sink below $40 under ‘extreme’ conditions, predicts Goldman Sachs

For investors wishing to take bullish wagers, this oversold scenario presents an opportunity for a tactical comeback trade. A low-risk entry might be made in the 4,870-4,800 range, with a stop loss below 4,600 and upside targets of 5,380 and 5,535.  

"Swing traders can look for bullish reversal candlestick patterns and RSI divergence on the daily chart as confirmation before entering. Investors should maintain a cautious size position, respect critical support levels, and trail profits as crude tries resistance zones on the way up," said the analyst.

According to Rahul Kalantri, VP of Commodities, Mehta Equities, the escalating trade war has fuelled global recession fears dragging equity markets and oil prices. With inflation risks and demand destruction looming large, oil remains under pressure, caught in the crossfire of a global trade war. 

“We expect crude oil prices to remain volatile. Crude oil has support at $56.50-55.40 and resistance at $58.90-60.00. In INR, crude oil has support at ₹5,080-4,950 while resistance is at ₹5,360-5,450,” said Kalantri.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.