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Informist, Wednesday, Nov. 6, 2024

 

By Ashutosh Pati and Sandeep Sinha

 

MUMBAI – Crude oil prices are likely to trade in a broad range this month with worries of rising geopolitical tensions in West Asia offsetting concerns about demand, analysts said. Prices recovered at the beginning of the month after falling below $70 per barrel in the last week of October as the Organization of the Petroleum Exporting Countries and its allies extended their voluntary production cuts of crude oil till the end of December. Prices also recovered due to the likely supply disruption in the Gulf of Mexico because of tropical storm Rafael.

 

With weakening demand and increasing oil supply outside OPEC and its allies, the cartel cannot expand production without risking oversupply and a fall in prices. This suggests that OPEC and its allies are unlikely to have much of a choice in a month's time other than to postpone the production increase yet again, Commerzbank AG said in a report.

 

Market concerns persist as economic slowdowns in China, the US, and Europe, along with rising production from non-OPEC countries and record output in the US, continue to apply downward pressure on prices. Investors remain cautious as diplomatic efforts to lower tensions in West Asia had led to a fall in the premium on crude oil prices.

 

Eight members of OPEC and its allies--Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman--extended their voluntary production adjustments of 2.2 million barrels per day till the end of December. 

 

OPEC and its allies trimmed the global oil demand for 2024 by nearly 106,000 barrels per day to 1.9 million barrels per day in October. The cartel sees demand for crude oil in 2025 rising by 1.6 million barrels per day, 102,000 barrels per day lower than the previous month's estimate. Moreover, 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.

 

"A win by Trump could weigh on crude oil prices as he has advocated for increasing the supply of conventional sources of energy such as crude oil in the past, while a Harris win might not affect crude oil prices in a big way, which could then trade range-bound,” said Ashwini Bansod, head of research, commodities, at PhillipCapital.

 

According to the median of estimates by 16 brokerages polled by Informist, the November crude oil contract on the Multi Commodity Exchange of India is seen in the range of INR 5,565-6,400 per barrel this month. The December contract of West Texas Intermediate crude on the New York Mercantile Exchange is seen in the range of $66.00-$77.00 per barrel for the rest of the month.

 

At the time of writing this report, the November crude oil contract on the MCX was down 1.8% at INR 5,950 per barrel and the December WTI contract on NYMEX was down 2.1% at $70.46 per barrel.

 

“Oil prices are finding support after OPEC+ decided to postpone its production increase to January instead of December, citing weak demand and rising supply from non-OPEC sources,” said Ravinder Kumar, senior research analyst at SMC Global Securities. “The charts show a positive trend, with potential for prices to reach around INR 6,350. Buying on dips could be a good strategy, with strong support in place near INR 5,580,” Kumar said.

 

The outcome of the meeting of China’s National People's Congress on Friday to revive the slowing economy may also support crude prices, as any revival of the economy will improve energy demand in the country.

 

Meanwhile, in the US, the Associated Press called the presidential election for Donald Trump at 1604 IST. ING Economics said in its report that for crude oil fundamentals, "a Trump victory could provide some short-term upside with the risk of stricter sanction enforcement against Iran. However, in the medium to longer term, a Trump victory could be more bearish for oil due to trade and foreign policy."

 

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

 

Brokerages	MCX support (in rupees)	MCX resistance (in rupees)	NYMEX support ($)	NYMEX resistance ($)
BlinkX by JM Financial	5,680	6,500	65.90	78.50
Emkay Global	5,500	6,470	65.15	77.50
Finlit Consulting	5,800	6,200	68.00	74.00
ICICI Securities	5,600	6,400	66.00	77.00
Kedia Comtrade	5,500	6,420	66.00	76.00
Kotak Institutional Equities	5,500	6,400	66.00	78.00
LKP Securities	5,600	6,475	67.00	76.00
Motilal Oswal	5,500	6,300	--	--
Nirmal Bang	5,530	6,450	65.50	76.00
PhillipCapital	5,550	6,600	67.00	76.00
Prithvi Finmart	5,700	6,400	66.00	76.00
Reliance Securities	5,500	6,325	65.00	77.00
SMC Global	5,580	6,350	65.00	79.00
Sharekhan by BNP Paribas	5,500	6,400	65.00	78.00
Ventura Securities	5,640	6,500	67.00	77.00
Vijay Bhambwani	5,590	6,392	64.39	76.52
Median	5,565	6,400	66.00	77.00

 

End

 

US$1 = INR 84.28

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

 

Edited by Rajeev Pai

 

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