Category: Forex News

Oil prices drop after high US crude stock offsets impact of Middle-East conflict; Brent at $89/bbl

Oil prices fell on Wednesday, April 10, after US government data showed earlier today that crude oil and fuel inventories rose by much more than expected on weak demand and lower oil exports. US crude stocks climbed by 5.8 million barrels in the week ended April 5, more than double of analysts’ expectations.
Brent crude futures dropped 28 cents, or 0.3 per cent, to $89.14 per barrel, while US West Texas Intermediate (WTI) crude futures fell 35 cents, or 0.4 per cent, to $84.88. In the previous session, both Brent and WTI fell more than one per cent. Coming to domestic prices, crude oil futures last traded 0.18 per cent higher at 7,115 per barrel on the multi commodity exchange (MCX) platform.

Also Read: Oil prices ease for second day over Gaza ceasefire talks, Brent dips to $89: Analysts peg near-term range at $85-95/bbl

What’s dragging crude oil prices?

-Refined products inventories rose unexpectedly with gasoline up by 700,000 barrels and distillate stocks by 1.7 million barrels. The US Energy Information Administration (EIA) data also showed a 2.1 million barrel per day (bpd) drop in oil product supplied, a proxy for fuel demand, and a 2.7 million bpd drop in crude oil exports.

-Separately, the US EIA sharply raised its forecast for crude oil output. It now expects an increase of 280,000 bpd to 13.21 million bpd in 2024 – which is higher from its earlier forecast of a 20,000 bpd increase in output.

-The US consumer price index (CPI) rose 0.4 per cent sequentially–higher than Wall Street estimates which faded away hopes of a rate cut in June, according to data released by the Labor Department’s Bureau of Labor Statistics,

-The commander of the Revolutionary Guard’s navy in Iran said it could close the Strait of Hormuz if necessary. About a fifth of the volume of the world’s total oil consumption passes through the strait daily.

-On Tuesday, Hamas said that an Israeli proposal on a ceasefire did not meet demands of Palestinian militant factions, but it would study the offer further and deliver its response to mediators, according to news agency Reuters.

-A continuing conflict in the Middle-East could drag in other countries, particularly Hamas-backer Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC) cartel, led by Saudi Arabia.

Also Read: US inflation beats Wall Street estimates, rises 0.4% in March; Fed’s June rate cut hopes fade away

Where are oil prices headed?

The US EIA said it expects Brent crude prices to average $88.55 a barrel in 2024, up from a previous forecast of $87 per barrel. Analysts said that crude oil experienced profit-taking amidst a stable dollar index and an increase in US bond yields. However, concerns regarding potential retaliation from Iran against Israel will push oil prices.

‘’We do not anticipate any significant downside in crude oil shortly. However, we do not foresee Brent crude reaching $100 levels, as we anticipate that OPEC may expand output by 0.5 million barrels per day if the crude oil market continues to be in deficit. Our base case is for crude to trade in a range from $85 to $95 levels in the near future,” said Amit Goel, Co-Founder & Chief Global Strategist, Pace 360.

With demand holding up and growing in CY24, the crude oil market faces a deficit of almost one million bpd, highlighted commodity analysts.

‘’Expectations for the trading session suggest continued volatility in crude oil prices. Support for crude oil stands at $84.05–83.40, with resistance at $85.50-86.20 for today’s session. In terms of INR, crude oil is anticipated to find support around 7,020-6,930, while facing resistance at 7,190-7,280,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

 

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Published: 10 Apr 2024, 10:07 PM IST


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