Oil prices stabilized on Monday, August 21 after briefly turning negative following gains of more than $1 earlier in the session, as markets weighed supply tightness against expectations of slow demand growth, particularly from China.
China’s central bank trimmed its one-year lending rate by 10 basis points and left its five-year rate unmoved, in a surprise to analysts who had expected cuts of 15 basis points to both. The recovery in the world’s second largest economy has been slowed by a worsening property crisis, weak spending and lower credit growth.
Brent crude was up 14 cents to $84.94 a barrel, while US West Texas Intermediate crude was up 18 cents at $81.43 a barrel. Both front-month benchmark prices snapped a seven-week winning streak last week with a weekly loss of 2 per cent on concern that China’s sluggish economic growth will curb oil demand, while the possibility of further increases to US interest rate also overshadows the demand outlook, according to news agency Reuters.
Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for an August 21 expiry, were last trading lower by 0.1 per cent at ₹6,765 per bbl, having swung between ₹6,745 and ₹6,853 per bbl during the session so far, against a previous close of ₹6,772 per barrel.
What’s driving oil prices?
-Crude oil prices rose today as global supply is tightening with lower exports from Saudi Arabia and Russia, offsetting nagging concerns about global demand growth amid high interest rates.
-Members of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, Russia and Saudi Arabia, a group know as OPEC+ have made output cuts to limit the availability of oil in the market. Saudi Arabia has in addition volunteered to cut output by another 1 million barrels per day from July through September.
-China’s crude oil imports from top exporter Saudi Arabia are expected to remain depressed through the third quarter, after its customs office reported inbound shipments from the kingdom fell to their lowest in 13 months in July.
-Imports from Saudi Arabia in July came in at 5.65 million metric tons, or 1.33 million bpd, the lowest since June 2022. July’s Saudi imports slipped 31 per cent from June and are down 14 per cent from a year earlier.
-China’s crude oil imports from Saudi Arabia are expected to remain depressed through the third quarter, according to analysts. A weaker dollar makes oil purchases less expensive for holders of other currencies, potentially boosting demand.
Technical View
Religare Broking has neutral/sideways sentiments on MCX Crude Oil. ‘’MACD bearish crossover suggest possibility of weakness. However, prices should dip below 6,720 ranges for weakness. A steady gains above 6,850 may strengthen the prices as well.,” said the brokerage firm in its research report. Religare sees technical levels between ₹6,330 – ₹7,260. The turnaround is seen at ₹6,720.
Download The Mint News App to get Daily Market Updates & Live Business News.
Updated: 21 Aug 2023, 10:11 PM IST