This week, we saw crude oil prices jump by almost 10% from a low on Monday, both in international and domestic markets, as the European Union, the world’s largest trading alliance, announced plans to phase out Russian oil imports in offsets. demand concerns. in China’s top importer.
The President of the European Commission, Ursula von der Leyen, has phased out Russia’s war on Ukraine, as well as sanctions on Russia’s top bank, in order to deepen Moscow’s isolation.
OPEC + expects a surplus of 1.9 million barrels per day in 2022, 600,000 bpd higher than the previous forecast, amid expectations of slower growth in demand this year.
The report, prepared for the OPEC + Joint Technical Committee meeting, also shows that the OECD’s oil reserves slightly exceed the 2015-2019 average in the fourth quarter.
The review reflects a weaker forecast for oil demand growth agreed by the Organization of the Petroleum Exporting Countries (OPEC) in its monthly report on oil in April.
Prices were also supported by OPEC + confirming a limited increase in production following the European Union’s proposed ban on imports from Russia. OPEC and its allies will nominally increase production by 432,000 barrels per day in June.
However, OPEC only increased by only 10,000 barrels per day in April. OPEC now expects world oil demand in 2022 to increase by 3.67 million bpd in 2022, a decrease of 480,000 bpd from the previous forecast.
The group cited the impact of Russia’s invasion of Ukraine, rising inflation as crude oil prices rose and the revival of the Omicron coronary artery strain in China as reasons for the review.
US crude oil inventories rose unexpectedly last week, but distillation and gasoline inventories fell again as refineries continue to increase fuel exports to the world in need of supply, the Energy Agency said on Wednesday.
Crude oil prices also received support, with natural gas prices rising by more than 9% at one point and peaking at $ 8,169 per million British thermal units (MMBtu), the highest since September 2008.
Natural gas increased the outlook for increased demand for LNG exports from the United States, but warmer weather forecasts than usual could increase demand for refrigeration.
However, US disappointment, a weakness in the dollar index and concerns about Chinese demand could limit profits. The EU plans to complete the package of sanctions before the end of the week, or no later than May 9, according to diplomats.
Crude oil prices also received support after a report leaked that the United States will accept bids this fall to buy back 60 million barrels of crude oil for the US Petroleum Fund, the first step in renewing supplies after record sales this spring.
The US dollar index exceeded 103.50 and traded at a nearly 20-year high, 10-year US bond yields also exceeded 3.0% and traded at a 3-1 / 2 year high.
We expect crude oil prices to remain volatile. The long-term price outlook is also good as the EU prepares for a Russian oil embargo, which could lead to the loss of up to 2 million bpd in Russian production by the end of this month.
We expected next week’s WTI crude oil trading range to be between $ 100.00 and $ 114.50; however, the currency (USDINR) will play an important role in determining the price of domestic crude oil.
We expect oil prices to remain volatile next week. WTI crude oil has a support of $ 103.80- $ 98.40 and resistance is $ 114.5- $ 117.65, in INR terms crude oil has a support of Rs8,240-7,870; but the resistance is at Rs8,650–8,820.
(Author is VP Commodities, Mehta Equities Ltd)
(Disclaimer: Advice, suggestions, opinions and opinions given by experts are their own. This does not represent the views of the Economic Times)
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