Brent recovers to trade above $80/bbl; demand concerns persist

Around 1pm, the January contract of Brent on the Intercontinental Exchange traded at $80.08 per barrel, up 0.68% from previous close. The December contract of West Texas Intermediate (WTI) on NYMEX rose 0.61% to $75.79 a barrel.

Analysts attributed the rise in prices to bargain buying.

Prices had dropped below $80 per barrel on Wednesday for the first time since July due to lackluster economic outlook in China and Europe, said Rahul Kalantri, vice president, commodities, Mehta Equities. He noted that oil prices have declined 10% in the past eight days.

“Projections from the EIA indicate that U.S. crude production will see a slight increase this year, falling slightly below earlier expectations. However, there’s an anticipated decline in petroleum consumption by 300,000 barrels per day (bpd), which contrasts sharply with the previous forecast of a 100,000-bpd increase. This shift has been intensified by a notable decrease in Chinese imports, further exacerbating worries about oil demand. Consequently, this triggered a significant selloff in the crude oil market,” Kalantri said.

Further, recession fears within the Eurozone have also exerted pressure on crude oil prices. He was of the view that the rest of today will remain volatile.

Amid concerns of a decline in major economies, India witnessed a 1.6% demand growth for oil production on a month-on-month basis for October. 

“India’s oil products demand increased by 80,000 b/d on the month in October helped by increased mobility and consumption during the festive season which began from mid-October. On a year-on-year basis, total demand was up by 197,000 b/d, or 4% as strong economic fundamentals continue,” said a report by S&P Global Commodity Insights on Wednesday.

S&P has has also revised the outlook for 2023 demand outlook for oil in India to 258,000 barrels per day, higher by 9,000 bpd from the previous estimate on strong diesel sales.

With the easing in global prices, the Indian basket of crude oil stood at $82.64 per barrel on Wednesday, according to data from the Petroleum Planning & Analysis Cell (PPAC). Last month, it averaged at $90.08 a barrel, with November average so far at $86.2 per barrel

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Updated: 09 Nov 2023, 02:06 PM IST