Oil prices settled nearly one per cent higher in the previous session, with global benchmark Brent crude recording its first weekly gain in three weeks, after bullish macroeconomic data indicators from the world’s top two oil consumers – China and the US – bolstered hopes for higher demand.
Brent settled 71 cents higher, or 0.9 per cent, at $83.98 a barrel. US West Texas Intermediate crude (WTI) gained 83 cents, or 1.1 per cent, to $80.06. For the week, Brent gained about one per cent, while WTI rose two per cent, according to news agency Reuters. On the domestic front, crude oil futures settled 0.12 per cent higher at ₹6,670 per barrel on the multi commodity exchange (MCX).
Also Read: IEA vs OPEC: IEA widens gap with OPEC on crude oil demand projections for 2024; June policy decision eyed
What’s driving crude oil prices?
-China’s industrial output rose 6.7 per cent year-on-year (YoY) in April as a recovery in its manufacturing sector gathered pace, pointing to possibly stronger demand to come. China also announced major steps to stabilise its crisis-hit property sector. The Chinese figures showed potential for demand construction and supported oil prices, said analysts. However, government data showing a drop in China’s annual refined output may have offset that support.
-The declines in oil and refined product inventories at global trading hubs have also created optimism about demand, reversing a trend of rising stockpiles that had weighed heavily on crude oil prices in previous weeks. The US oil rig count rose by one this week to 497, the first increase in four weeks, said energy services firm Baker Hughes.
-Recent US economic indicators have fed into the optimism over global demand for oil. US consumer prices rose less than expected in April, data showed on Wednesday, boosting expectations of lower interest rates. Lower US interest rates could help soften the dollar, which would make greenback-denominated oil cheaper for buyers holding other currencies.
-On the supply side, investors were mostly looking for direction from the upcoming output policy decision of the Organisation of Petroleum Exporting Countries (OPEC) on June 1, 2024. Analysts said with the price of Brent crude hovering below $90, a level quietly being targeted by Saudi Arabia and others, the upcoming OPEC meeting is likely to result in a rollover of current production cuts.
Where are prices headed?
WTI Crude oil futures extended gains on Thursday and closed above $79/bbl, as a soft US inflation print for April and moderation in hiring coupled with decline in US crude stocks continued to support prices despite a cut in IEA demand growth forecast. Geo-political tensions remain high as fierce fighting continues around the southern city of Rafah and intense battels between Israeli forces and Palestinian groups in the northern Gazan town of Jabalia, according to Kaynat Chainwala – Senior Manager, Commodities Research – Kotak Securities.
‘’Anticipating continued volatility, we project that crude oil prices will fluctuate. Support for crude oil is seen at $77.80–77.10, with resistance expected at $79.20-79.90. In the Indian rupee context, crude oil is supported at Rs6,480-6,410, with resistance at ₹6,630-6,690,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
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Published: 18 May 2024, 09:04 PM IST