Informist, Thursday, Jul 4, 2024
By Sayantan Sarkar and Sandeep Sinha
NEW DELHI – A host of factors promise the month of July to be bullish for crude oil prices, analysts said. Geopolitical unrest in West Asia and risks to supply from the Gulf of Mexico due to Hurricane Beryl are likely to keep the momentum in crude prices upward this month, they said.
Fears of a wider regional escalation in West Asia in light of rising cross-border fighting between the Hezbollah in southern Lebanon and Israel, the possibility of Iran entering into the fray, and stalled talks between Israel and Palestine will keep the risk premium on oil prices intact, analysts said. West Asia sits on more than half of the world's oil reserves.
According to the median of estimates by 16 brokerages polled by Informist, the July crude oil contract is seen in the range of 6,660-7,355 rupees per barrel this month on the Multi Commodity Exchange of India. The West Texas Intermediate August contract on the New York Mercantile Exchange is seen in the range of $78.5-$88.0 per bbl for the rest of the month.
At the time of writing, the July crude oil contract on MCX was up 0.2% at 6,965 rupees per bbl. The August West Texas Intermediate contract on the NYMEX was $83.42 per bbl, down 0.6%.
Meanwhile, supply-side concerns continue to rise as the market remains cautious in the wake of Hurricane Beryl in the US Gulf of Mexico. "Recent reports suggest that the hurricane is now disrupting US oil output, with companies like Shell Plc, BP Plc, and ExxonMobil Corp evacuating some of their platforms in the Gulf of Mexico," Warren Patterson, head of commodities strategy at ING Group, said in a note. According to the data from the National Hurricane Center and the Bureau of Ocean Energy Management, around 73,000 bbl per day of federal offshore oil production is believed to be within the projected path of the storm. The US is the largest producer of crude oil.
Moreover, the American Automobile Association has projected a significant 5.2% increase in travel during the US Independence Day holiday compared with 2023, with car travel up 4.8%. "This forecast strongly supports expectations of higher gasoline demand as the peak summer driving season kicks into high gear. The anticipated surge in U.S. gasoline consumption is likely to be a key driver for oil prices in the coming weeks," James Hyerczyk, an analyst with Fxempire.com, said in a report.
"The outlook for crude oil is decidedly bullish in the short term. OPEC+ (Organization of the Petroleum Exporting Countries and allies) is expected to maintain its production restrictions until benchmark crude prices consistently exceed $90 per barrel, providing a solid floor for prices," Hyerczyk further said in the report.
Recent data points indicate favourable conditions for oil demand. Signs of subsiding inflation in the US have strengthened expectations of an interest rate cut by the US Federal Reserve, possibly as early as September, analysts said. Lower interest rates bode well for demand for oil as it increases liquidity in the economy and borrowing costs fall.
Fxempire.com expects Brent crude oil prices on the Intercontinental Exchange to test the $90-per-bbl mark in the coming weeks, with WTI prices following suit. "However, traders should monitor U.S. gasoline consumption data and Chinese crude buying activity, as these factors will be crucial in sustaining the upward price momentum," according to the report.
Motilal Oswal Financial Services expects crude oil contracts on MCX to rise close to the highs of 7,322 rupees a bbl touched in April. "However, a decisive break above this level is likely to push prices further...Buy on dips is suggested in the counter for coming weeks," the brokerage said in a report.
Following is a summary of the poll by Informist on crude oil prices for July and details of the estimates by respondents:
| Brokerages | MCX support (in rupees) | MCX resistance (in rupees) | Nymex support ($) |
NYMEX resistance ($) |
|---|---|---|---|---|
| Angel One | 6,670 | 7,360 | 75.85 | 88.20 |
| Axis Sec | 6,700 | 7,200 | 80.00 | 87.00 |
| BlinkX by JM Financial | 6,700 | 7,220 | 79.50 | 88.00 |
| Finlit Consulting | 6,700 | 7,200 | 80.00 | 86.00 |
| ICICI Securities | 6,600 | 7,350 | 76.00 | 88.00 |
| Kedia Comtrade | 6,600 | 7,400 | 77.00 | 89.00 |
| Kotak Securities | 6,680 | 7,380 | 80.00 | 88.00 |
| LKP Securities | 6,800 | 7,150 | 80.00 | 89.00 |
| Mehta Securities | 6,650 | 7,600 | 78.50 | 87.20 |
| Motilal Oswal Financial Services | 6,500 | 7,322 | - | - |
| Nirmal Bang | 6,770 | 7,230 | 82.50 | 87.00 |
| Prithvi Finmart | 6,550 | 7,450 | 76.60 | 90.00 |
| Reliance Securities | 6,300 | 7,500 | 75.00 | 89.00 |
| SMC Global | 6,750 | 7,250 | 79.60 | 87.80 |
| Sharekhan by BNP Paribas | 6,345 | 7,542 | 78.00 | 86.91 |
| Vijay Bhambwani | 6,439 | 7,418 | 75.11 | 89.15 |
| Median | 6,660 | 7,355 | 78.50 | 88.00 |
End
US$1 = 83.49 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Ashish Shirke
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (11) 4220-1000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.
Share this Story:
