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Informist, Monday, Aug 5, 2024

 

By Sayantan Sarkar and Sandeep Sinha

 

NEW DELHI/MUMBAI – Crude oil prices are likely to remain range-bound this month with the overall bias on the lower side as the market continues to be worried about poor demand, particularly from China, analysts said. 

 

Crude shipments to China, the world's largest importer of the commodity, have fallen in recent months. Other commodity markets, such as copper, also point to poor economic growth in the Asian giant. "We expect (the) sell-off in crude to continue as the recessionary fear from (the) US and economic slowdown in China will significantly affect the consumer and industrial demand for oil," said Mohammed Imran, research analyst at Sharekhan by BNP Paribas. 

 

In July, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange fell 6.6% despite escalation in geopolitical tensions in West Asia.  

 

According to the median of estimates by 16 brokerages polled by Informist, the August crude oil contract is seen in the range of 5,975-6,875 rupees per barrel this month on the Multi Commodity Exchange of India. The WTI September contract on the NYMEX is seen in the range of $71.05-$82.00 per bbl for the rest of the month.

 

At the time of writing this report, the August crude oil contract on MCX was down 0.7% at 6,105 rupees per bbl. The September West Texas Intermediate contract on the NYMEX was $72.48 per bbl, down 1.3%.

 

"I think you’ve got a scenario where traders are expecting less and less demand as the (global) economy stops. I think it’s probably a little overdone, but clearly, at this point, you can't be bullish," Christopher Lewis, analyst at FXEmpire.com said in a note. Lewis believes that if WTI prices fall below the $70-per-bbl mark, traders could sell more. "And with that being the case, it just looks like we’re going to spend the rest of the summer just bouncing around. Now where the actual bottom of the range is, I believe (it) is probably closer to the $67.50 level," Lewis said. 

 

The Joint Ministerial Monitoring Committee of the Organization of the Petroleum Exporting Countries said last week that the gradual phasing out of the voluntary production cuts of crude oil by certain members of the cartel could be paused or reversed depending on market conditions. 

 

In June, OPEC and its allies extended their longstanding output cuts till the end of 2025 to keep oil prices at the level desired by the cartel. OPEC and its allies have withheld 3.66 mln barrels per day of crude from the market since last year, in addition to voluntary cuts of 2.2 mln bpd by eight members of the cartel. OPEC also said the voluntary cuts by certain members, including Saudi Arabia's 1-mln-bpd reduction, would be extended till the end of September and then gradually phased out by September 2025.

 

It remains to be seen what decisions OPEC and its allies take in the coming months, as most oil-producing nations within the cartel rely heavily on exports of oil. Traders will monitor the demand scenario from China and economic data releases from the US. They will also keep an eye on the geopolitical tensions in West Asia for the rest of August.  

 

Following is a summary of the poll by Informist on crude oil prices for August and details of the estimates by respondents:

 

Brokerages	MCX support (in rupees)	MCX resistance (in rupees)	NYMEX support ($)	NYMEX resistance ($)
Angel One	5850	7070	70.15	84.77
Axis Securities	5800	6200	67	75
BlinkX by JM Financial	6270	6630	74.5	80.7
Finlit Consulting	5900	6300	70	75
HDFC Securities	6210	6720	72.5	80.9
ICICI Securities	5900	7000	70	80
Kedia Comtrade	6000	6850	72	82
Kotak Institutional Equities	5900	7000	70.5	82
LKP Securities	6250	6700	73.8	80.25
Mehta Securities	6150	7100	70.5	83.5
Motilal Oswal	6200	7000	73	84
Prithvi Finmart	5950	6700	70.8	80.8
Reliance Securities	6200	7056	72.5	82.5
SMC Global	5850	6350	68.5	82.7
Sharekhan by BNP Paribas	5900	6900	72.23	83.58
Vijay Bhambwani	6179	6973	71.29	83.42
Median	5975	6875	71.045	82

 

End

US$1 = 83.84 rupees

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

 

Edited by Vandana Hingorani

 

 

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