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Informist, Tuesday, Mar. 4, 2025

 

By Ashutosh Pati

 

MUMBAI – Crude oil prices are likely to be range-bound this month with the bias being negative due to uncertainty around US tariffs, potential oversupply of the fuel, and weak global demand, analysts said.

 

Eight member nations of the Organization of the Petroleum Exporting Countries and its allies have decided to proceed with the gradual unwinding of the voluntary production cuts from Apr. 1. This gradual increase in production may be paused or reversed, subject to market conditions, OPEC said. Market participants expected the cartel to further delay raising the output.

 

"It appears pressure from the Trump administration to keep prices lower has won out. Given the market was largely expecting another delay, oil prices are likely to remain under downward pressure," Daniel Hynes, senior commodity strategist at ANZ Research, said in a note.

 

US President Donald Trump had recently asked the cartel to lower oil prices and increase production. The cartel and Trump often clashed during his first term when he demanded that OPEC raise crude oil output to compensate for the fall in Iranian supply due to the US sanctions.

 

In February, OPEC's crude oil production increased to 27.35 million barrels per day, up 320,000 barrels per day from the previous month, analysts at ING Economics said, citing a Bloomberg survey. Iraq accounted for bulk of the increase, with its production rising by 150,000 barrels per day to 4.16 million barrels per day.

 

According to the median of estimates of 15 broking firms polled by Informist, the March crude oil contract on the Multi Commodity Exchange of India is seen in the range of INR 5,700-INR 6,400 per barrel this month. The April contract of the West Texas Intermediate crude on the New York Mercantile Exchange is seen in the range of $66-$75 per barrel during the month.

 

At 1637 IST, the March crude oil contract on the MCX was down almost 1% at INR 5,933 per barrel. The April West Texas Intermediate contract on the NYMEX was also down nearly 1% at $67.74 per barrel.

 

The 25% tariff announced by Trump on imports from Canada and Mexico and an additional 10% on imports from China took effect Tuesday. In retaliation, China has imposed additional tariffs of 10-15% on certain US imports starting Mar. 10. The tariffs will apply to key US exports, including chicken, wheat, corn, and cotton, media reports quoted China's finance ministry as saying.

 

The risk of a global trade war has market participants concerned about the potential derailment of global economic growth. "...So this (the tariffs) will increase the trade war fear that can weaken the economic growth. Because of that, the demand for crude oil will reduce," Deveya Gaglani, senior research analyst-commodities at Axis Securities, said.

 

In January, crude oil prices rose to a six-month high after Trump imposed stricter sanctions on Russia's energy sector. Prices have since retreated and fallen for six straight weeks. The possibility of more oil coming into the market from Iraq has also weighed on sentiment. Oil exports from Iraq's Kurdistan region, amounting to around 300,000 barrels per day, could resume this month through the Ceyhan pipeline. However, "this isn't the first time that there's been talk of an imminent restart of flows," analysts at ING Economics said in a report.

 

A potential oversupply in the oil market, driven by increases in production from countries outside OPEC and allies, continues to be a drag on prices. Global production is expected to increase by 1.9 million barrels per day this year because of growth in supply from countries outside of the OPEC and its allies and relaxation in the cartel's production cuts, the US Energy Information Administration had said in its Short-Term Energy Outlook for February.

 

Global oil inventories will begin increasing once the OPEC and its allies begin raising production from April, the EIA said. These production increases, combined with expectations of relatively weak global oil demand growth, will lead to a 900,000 barrels per day increase in global oil inventories in the second half of 2025.

 

Crude oil inventories in the US, excluding those in the strategic petroleum reserves, rose by 4.6 million barrels to 432.5 million barrels in the week ended Feb. 14, marking the fourth consecutive weekly rise in stocks.

 

Meanwhile, hopes of a peace-deal between Russia and Ukraine, brokered by the US, seem to have waned after Ukrainian President Volodymyr Zelenskyy and Trump were involved in a heated argument on Friday. Zelenskyy was eventually told to leave the White House before he and Trump could even take the stage for a scheduled news conference. Trump later ordered a halt of all military aid to Ukraine.

 

"It's unclear where the US now stands, making a peace deal seems more distant than a week ago. This is altering energy-market hopes for an easing of sanctions," ING analysts said.

 

On the other hand, China's manufacturing data could provide some support to crude oil prices. China's official manufacturing purchasing managers' index rose to 50.2 in February from 49.1 a month before, beating the market forecast of 49.9. The Caixin China manufacturing PMI rose to a three-month high of 50.8 in February from 50.1 the previous month. A reading below 50 indicates a contraction in economic activity, and a number above 50 signals an expansion.

 

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

 

Brokerages	MCX support (in rupees)	MCX resistance (in rupees)	NYMEX support ($)	NYMEX resistance ($)
Axis Securities	6000	6300	66	75
Emkay Global	5870	6340	67.5	72.5
Finlit Consulting	5900	6300	66	75
HDFC Securities	5690	6520	66	73.8
ICICI Securities	5700	6450	65	75
JM Financial Services	5850	6300	65	73.3
Kedia Comtrade	5700	6400	65	75
Kotak Securities	5850	6300	67.5	72
LKP Securities	5700	6450	67	72
Mirae Asset Sharekhan	5600	6500	66	75
Motilal Oswal	5975	6280	69.5	70.6
Prithvi Finmart	5740	6445	64	75
Reliance Securities	5700	6675	65.1	76.5
Religare Broking	5600	6960	65.5	78
Ventura Securities	5620	6150	65.5	73.5
Median	5700	6400	66	75

 

End

 

US$1 = INR 87.26

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

 

Edited by Ashish Shirke

 

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