Crude oil prices are likely to extend gain for second straight trading day in opening session Tuesday on weakening of local currency against the dollar trimming the prospects of higher imports and as investors may cover short positions at lower levels, analysts said.
"Rupee depreciation and low level buying will push the prices of crude," said Ajay Kumar Kedia, research analyst with Kedia Commodities.
At 9:30AM rupee depreciated to Rs 64.19/$1 as compared to previous close of Rs 63.87/$1.
Crude oil prices may also be supported on short-covering after prices fell to over four-month low, analysts said.
Domestic crude oil prices fell by nearly 4% to Rs 2,824 per barrel in past three straight trading sessions (Aug 5-7), its lowest level since Mar 19 on weak demand from bulk consumers and oversupply woes in global markets.
Meanwhile, China devalued its yuan currency following a run of poor economic data that underscored the market view that fundamentals are too weak to warrant higher oil prices.
China devalued the yuan on Tuesday in what its central bank called a "one-off depreciation" of nearly 2% as its economy grows at its slowest pace in decades, guiding the currency to its lowest point in almost three years.
Investors will keep a close watch on American Petroleum Institute (API) coming later today and Energy Information Association (EIA) inventories data which will be released on Wednesday.
West Texas Intermediate, the US benchmark, for September delivery jumped 3.17% to $44.96 a barrel on the New York Mercantile Exchange Monday.
Brent, European benchmark for September contract surged 4.19% to $51.02 per barrel, on the London-based ICE Futures Europe Exchange Monday.
Crude oil for August delivery rose 1.27% to Rs 2,860 per barrel, at the closing of trades Monday, on Multi-Commodity Exchange (MCX).
Crude oil prices for August delivery are likely to find support at Rs 2,745 per barrel and resistance at Rs 2,943 per barrel today on Multi-Commodity Exchange (MCX).
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