Oil scores 3rd weekly gain after hitting 3-month high; check key triggers
Even after falling more than a dollar a barrel in the previous session, crude oil benchmarks recorded their their-straight weekly gain as the dollar strengthened and oil traders booked profits from a strong rally fueled by softer US inflation. Last week, oil had been on a record-gaining streak with prices hitting nearly three-month highs with global oil benchmark Brent hovering above $80 per barrel-mark after US inflation data implied rate-hike cycle could be nearing an end in the world’s biggest economy.
Brent crude futures settled at $79.87 per barrel, down $1.49, or 1.8 per cent on July 14, while the US West Texas Intermediate crude futures fell $1.47, or 1.9 per cent, to settle at $75.42 a barrel. The futures contract structure of the global benchmark Brent indicates the market is tightening and that the Organisation of Petroleum Exporting Countries and its allies (OPEC+) could be succeeding in its aim to support the market.
Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a July 19 expiry, settled lower by 0.67 per cent at ₹6,204 per bbl, having swung between ₹6,175 and ₹6,321 per bbl during the session so far, compared to their previous close of ₹6,246 per bbl.
US dollar, supply cuts by producers: Key factors driving crude oil
-The US dollar index edged higher after hitting a 15-month low during the session, as investors consolidated ahead of the weekend. A stronger greenback reduces oil demand, making crude more expensive for investors holding other currencies.
-Oil prices gained nearly two per cent on a weekly basis, after supply disruptions in Libya and Nigeria heightened concerns that the markets will tighten in coming months. Several oilfields in Libya were shut down because of a local tribe’s protest against the kidnapping of a former minister. Separately, Shell suspended loadings of Nigeria’s Forcados crude oil owing to a potential leak at a terminal.
-The Libya disruption is halting an estimated 370,000 barrels per day (bpd) while the loss from the Nigerian outage is pegged at 225,000 bpd, PVM analyst John Evans told Reuters.
-Russian oil exports have also decreased significantly and, if this trend continues next week, it would probably drive prices up further since Russian oil exports are set to be reduced by 500,000 bpd in August, according to Commerzbank analysts.
-Oil prices have now rallied by around 12 per cent in two weeks, primarily in response to supply cuts from top producers Saudi Arabia and Russia. Top producer Saudi Arabia had pledged to extend a production cut of 1 million bpd in August.
-Official data released last week showed US consumer prices rose modestly in June and registered their smallest annual increase in more than two years as inflation continued to subside. Easing inflation in US provided a boost to prices as it lowered rate-hike concerns on markets.
-‘’Next week, the rally could resume as easing inflation, plans to refill the U.S. strategic reserve, supply cuts and disruptions could support the market, Rob Haworth, senior investment strategist at US Bank Wealth Management told news agency Reuters. “While oil prices are likely slightly overbought in the very near term, touching the highest levels since early May, the bias appears to be for a grind higher,” he added.
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Updated: 15 Jul 2023, 09:54 PM IST
