Oil prices declined on Thursday, May 23, for the fourth session in a row, as the prospect of higher-for-longer US interest rates raised worries around demand growth in the world’s biggest oil market. High interest rates increase the cost of borrowing, which can slow down economic activity and dampen demand for oil.
Brent crude oil futures were last down 45 cents, or 0.6 per cent, at $81.45 a barrel. US West Texas Intermediate (WTI) crude futures were 57 cents, or 0.7 per cent, lower at $77 a barrel. On the domestic front, crude oil futures were last up 0.02 per cent at ₹6,398 per barrel on the multi commodity exchange (MCX).
Also Read: US Federal Reserve minutes show officials rally around higher-for-longer rates
Why is crude oil under pressure?
-S&P Global data showed accelerating US business activity this month, however, manufacturers also reported a surge in prices for a range of inputs, suggesting a pickup in goods inflation in the months ahead.
-On Wednesday, the minutes from the US Federal Reserve’s latest policy meeting showed policymakers remain doubtful if the current interest rates are high enough to tame stubborn inflation.
-Also weighing on the market, US crude stocks rose by 1.8 million barrels last week, according to the Energy Information Administration (EIA), compared with an estimated draw of 2.5 million barrels. However, the EIA also reported US gasoline demand at its highest since November, providing some support for energy markets.
-Investors are also looking ahead to the June 1 meeting of the Organization of Petroleum Exporting Countries and its allies (OPEC+), where the group will decide its output policy. Russia said it exceeded its OPEC production quota in April for “technical reasons” and will present its plan to compensate for the error to the OPEC Secretariat, the Russian Energy Ministry said on Wednesday.
Also Read: IEA vs OPEC: IEA widens gap with OPEC on crude oil demand projections for 2024; June policy decision eyed
Where are prices headed?
Kaynat Chainwala – Senior Manager, Commodities Research – Kotak Securities said that with the current weakness in oil markets, OPEC might extend the output curbs into 2H 2024, when they meet on 1st June.
The risk premium from Middle Eastern tensions has declined while oil supplies remain unchanged, according to Rahul Kalantri, VP Commodities, Mehta Equities Ltd. ‘’We expect crude oil prices to remain volatile. Crude oil has support at $76.10–75.50 and resistance at $77.50-78.10. In INR, crude oil has support at ₹6,410-6,340 and resistance at ₹6,540-6,610,” added Kalantri.
You are on Mint! India’s #1 news destination (Source: Press Gazette). To learn more about our business coverage and market insights Click Here!
Download The Mint News App to get Daily Market Updates & Live Business News.
More
Less
Published: 23 May 2024, 10:42 PM IST