Crude oil trades higher on low US inventories

The supply tightness in the global market helped crude oil futures to trade higher on Thursday morning.

At 10.04 am, July Brent oil futures were trading at $114.45, up by 0.78 per cent; and July crude oil futures on WTI at $110.92, up by 0.53 per cent.

June crude oil futures were trading at ₹8,611 on Multi Commodity Exchange (MCX) in the early trade against the previous close of ₹8,549, up by 0.73 per cent; and July futures were trading at ₹8,437 against the previous close of ₹8,381, up by 0.67 per cent.

Data from the latest weekly petroleum status report of the US EIA (Energy Information Administration) highlighted the tightness in the crude oil market.

The US EIA report for the week ending May 20, released on May 25, said the US commercial crude oil inventories (excluding those in the strategic petroleum reserve) decreased by 1 million barrels from the previous week. At 419.8 million barrels, the US crude oil inventories were about 14 per cent below the five-year average for this time of year.

Imports decline

According to the report, the US crude oil imports averaged 6.5 million barrels per day last week, down by 82,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.4 million barrels per day, 8.6 per cent more than the same four-week period last year.

In his outlook for the day, Rahul Kalantri, VP (Commodities) of Mehta Equities Ltd, said crude oil inventories fell in the US by 1 million barrels last week and gasoline also fell drastically due to rising demand.

He said oil prices rose on Wednesday, buoyed by tight supplies and as US refiners pushing processing activity to their highest level since the beginning of the coronavirus pandemic.

In international markets, WTI crude settled at $110.33 and Brent at $114.03. In domestic markets, the crude prices settled on a positive note at ₹8,549, up by 0.43 per cent.

He said the crude oil prices rose amid weak Russian oil production since its invasion of Ukraine. Russia’s crude producers are struggling to place all their oil on the market — especially the European one — and domestic refinery throughput is also slumping amid lower demand. Despite this, rising oil and gas prices have resulted in record-high oil and gas revenues for Russia.

He said the US natural gas futures skyrocketed above the $9/MMBtu mark for the first time since August of 2008, and more than doubled in value since the beginning of 2022, with higher domestic and international demand being the primary driver.

“We expect crude oil prices to remain volatile in today’s session. Crude oil is having support at $107.20-$105.40 and resistance at $112.40-$114.95. In rupee terms, crude oil has support at ₹8,410-8,280, and resistance at ₹8,690–8,820,” he said.

Cotton, Dhania drop

June cotton futures were trading at ₹47,540 on MCX in the initial hour of Thursday morning against the previous close of ₹47,830, down by 0.61 per cent.

On the National Commodities and Derivatives Exchange (NCDEX), June steel long futures were trading at ₹48,400 in the initial hour of Thursday morning against the previous close of ₹47850, up by 1.15 per cent.

June dhaniya contracts were trading at ₹10,886 on NCDEX in the initial hour of Thursday morning against the previous close of ₹11,016, down by 1.18 per cent.

Published on

May 26, 2022

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