Crude oil prices were volatile in January with Nymex WTI Crude witnessing a slump of 4.3% only to witness a whopping recovery of 3.5% during the latter part of the month. Crude Oil will continue to gain on the back of increase in demand for distiallate and gasoline in USA amidst falling inventories, according to a monthly report from Angel Commodities.

The slump in crude oil prices in the first half of January was due to easing of supply concerns from Iran after sanctions on the country were eased. Downward pressure on prices was also a result of China's slower grwoth of 7.7%, the weakest growth since 1999.

However, the second-half of Jan’14 witnessed a bounce back due to fall in distillate and gasoline inventories in the US coupled with positive GDP estimates for the US economy for Q42013. Also, the proposed Keystone XL pipeline cleared a key hurdle with a study showing that the project’s effect on climate would be minimal. Prices also took support from rise in crude imports in China. The country’s crude oil imports for Dec’13 were 13 percent higher than a year earlier.

On the domestic bourses, it was seen that despite a month-on-month fall in Nymex crude oil prices by 1.2 percent, on the MCX, prices witnessed an increase of 0.8 percent as weakness in the Rupee supported prices higher. The Rupee depreciated by more than 1 percent in Jan’14 and during the same period oil prices touched a high of Rs.6199/bbl.

The International Energy Agency has raised its forecast for crude oil demand in 2014 and these estimates will also support upside in crude oil prices. Increase in imports from China and India will also add positivity towards crude oil.

While positive supportive fundamentals will help crude oil prices trade higher, at the same time sharp upside will be capped due to rising crude oil production in the US. Restart of crude oil production in Libya along with ease of supply concerns from Iran will additionally restrict sharp rise in crude oil prices.

In the Indian markets, Rupee appreciation will prevent sharp upside in crude oil prices. "Over the next fortnight, we expect crude oil prices on the Nymex to trade above the $100/bbl mark and test levels of $103-104/bbl. On the MCX, prices are expected to breach the Rs6300/bbl level and test Rs 6450-6500/bbl over the next fortnight."

Nymex Crude Oil March support seen at $95, $97.5, resistane $102, $104.4. MCx Crude Oil March support 5950, 6080, resistane 6350, 6500.