Oil gained 1 per cent on Thursday, November 2, to snap a three-day losing streak as risk appetite returned to financial markets after the US Federal Reserve kept benchmark interest rates on hold. Crude’s rally tracked gains across financial assets after Jerome Powell-led Federal Open Market Committee (FOMC) kept its benchmark interest rate unchanged at 5.25 per cent -5.50 per cent at its latest meeting on Wednesday.
The Bank of England (BoE) held interest rates at 15-year high – mark of 5.25 per cent at its latest meeting on Thursday, the second straight month of steady rates after 14 back-to-back hikes. BoE also stressed that it is not expecting to make rate cuts any time soon.
Brent crude futures were up 91 cents, or 1.08 per cent, at $85.54 a barrel, while US West Texas Intermediate crude futures gained 83 cents, or 1.03 per cent, to $81.27 a barrel. Oil price have slipped about 5 per cent over the previous three sessions. WTI crude oil futures tumbled to $81 per barrel earlier, which supported bullish sentiments in global and domestic markets.
Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a November 17 expiry, were last trading 0.56 per cent higher at ₹6,800 per bbl, having swung between ₹6,694 and ₹6,843 per bbl during the session so far, against a previous close of ₹6,762 per barrel.
What’s driving crude oil prices?
-US policymakers struggled at a two-day policy meeting this week to determine whether financial conditions may be tight enough already to control inflation, or whether an economy that continues to outperform expectations may need still more restraint.
-“Inflation is still too high. We will keep interest rates high enough for long enough to make sure we get inflation all the way back to the 2% target,” Bank of England Governor Andrew Bailey said.
-Elsewhere in the US, new unemployment claims increased slightly to 217,000 in the week to October 28, according to Labor Department data released on Thursday, but showed few signs of significant slowdown.
-In Europe, a contraction in manufacturing activity in the euro zone deepened in October, with its Purchasing Managers’ Index (PMI) falling by 0.3 points on the month to 43.1. A score of below 50 signals contraction.
-Investors will also be watching for developments in the Middle East, which have kept oil markets on edge as a wider conflict could disrupt supplies around the region. Fighting continued in Gaza as advancing Israeli tanks and troops encountered fierce resistance from Hamas militants.
Where are prices headed?
Analysts noted that crude oil prices showed high volatility, but were unable to hold their gains, slipping to one-month lows amid a loss of war premium. Crude oil prices have dropped more than 10 per cent in October, as the Israel-Hamas war has not affected oil supply from the Middle East.
‘’However, the US Fed concluded its monetary policy meeting with a pause on interest rates and also expressed uncertainty about further rate hikes. This, along with a decline in US 10-year bond yields and the dollar index, could support commodity prices,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd
‘’Crude oil prices could show some bargain buying and short coverings in today’s session. We expect crude oil prices remain volatile in today’s session. Crude oil is having support at $80.10–79.20 and resistance is at $81.70-82.40 in today’s session. In INR crude oil has support at Rs6,655-6,540 while resistance at ₹6,865-6950,” added Kalantri.
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Updated: 02 Nov 2023, 08:24 PM IST