Informist, Thursday, Oct. 31, 2024

MUMBAI – Significant uncertainty and volatility is expected in the oil market in the short term amid weak global oil demand, persisting geopolitical conflicts, interest rate cuts by global central banks, and refinery capacity addition in non-Organisation for Economic Cooperation and Development countries, Ventura Securities said in a research report.

A weak global oil demand outlook, primarily due to concerns about an economic slowdown in both China and the US, on account of weakening industrial production and manufacturing growth is seen weighing on crude oil prices in the long term. There is also the looming supply glut and long-term demographic shifts across the globe suggesting the potential for a future decline in global economic growth due to a smaller workforce, the report said.

Although there could be supply adjustments to meet global oil demand in the long term, the appetite for additional volumes is mainly driven by price stability, it said. "Since there is no pickup in demand, all other factors are secondary," said N.S. Ramaswamy, head of commodities at Ventura Securities. In the short term, factors such as geopolitical tensions and monetary policy measures could provide a premium to crude oil prices, Ramaswamy said.

The US Energy Information Administration cut its forecast for crude oil prices through the end of next year, largely due to lower growth in global oil demand. "The demand (for crude oil) in China could improve through economic improvement in the country," Ramaswamy said.

The recent stimulus measures by China could result in higher petroleum consumption in 2025. Similarly, refinery capacity additions in non-OECD countries – mostly in China and West Asia – are also expected to contribute to oil demand growth, the report said. These could lead to significant uncertainty and volatility in oil markets.

Ramaswamy expects the price of West Texas Intermediate crude oil on the New York Mercantile Exchange to stand at around $68-$74 in the short term. On the Multi Commodity Exchange of India, prices are likely to be volatile with marginal upside at INR 6,150-INR 6,200, he said. There is an opportunity to sell at every rise in prices in the short term. he said.

At 1425 IST, the most-active December crude oil contract on the NYMEX was at $68.61 per barrel. On the MCX, the most-active November contract was at INR 5,800, up 0.6% from the previous close. End

US$1 = INR 84.09

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Ashutosh Pati

Edited by Avishek Dutta

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