Oil prices fell about 3 percent to their lowest since late August on Tuesday, Nov. 7, as demand worries arose from mixed Chinese data and waning investor enthusiasm for interest rate hikes.
Trade data from the world’s biggest crude importer showed a fragile economic recovery as overseas shipments missed expectations, falling 6.4 percent, while imports rose 3 percent from a year earlier last month.
Brent crude futures fell $2.53, or 3 percent, to $82.65 a barrel, while U.S. West Texas Intermediate crude fell to $78.35 a barrel, down $2.47, or 3.1 percent. Both contracts hit their lowest levels since August 25, and Brent futures were poised to close below $84 a barrel for the first time since the October 7 attack by Hamas Islamists on Israel, according to Reuters news agency.
Crude is trading below its levels since before the Israel-Hamas war, which failed to disrupt supplies from the Middle East. The premium on front-month Brent contracts over those that load in six months was also at a 2-1/2-month low, indicating that market participants are less concerned about current supply deficits, the agency said.
At home, on the Multi Commodity Exchange (MCX), oil futures ahead of November 17 expiration last traded 4.66 percent lower at ₹6,508 per bbl, having swung between ₹6,504 and ₹6,730 per bbl during the session so far, against a previous close of ₹6,826 per barrel.
What weighs on crude prices?
-On demand, China’s oil imports in October showed strong growth both year-on-year and month-on-month, but its total exports contracted faster than expected. Expectations of crude run cuts by China-based refiners between November and December could also limit oil demand and exacerbate prices.
-World stocks, which often trade in tandem with oil, lost steam on Tuesday as investor enthusiasm for a peak in global interest rates faded. The US dollar has also rallied from recent lows, making oil more expensive for holders of other currencies.
-Last week, the US Federal Reserve decided to keep the key overnight interest rates unchanged at 5.25-5.50 percent. The Federal Open Market Committee (FOMC) led by Jerome Powell held interest rates steady at a 22-year high for the second time in a row, even as the US economy remains resilient despite high interest rates while inflation remains above the Fed’s 2 percent target . target level
-Minneapolis Federal Reserve President Neel Kashkari on Tuesday dashed hopes for early rate hikes, saying the U.S. central bank may have to do more to bring inflation back to its 2 percent target. Investors are awaiting comments from Fed Chairman Jerome Powell, who is due to speak on Wednesday and Thursday.
-Markets are also waiting to see if Saudi Arabia and Russia are prepared to curb production voluntarily after the end of the year in addition to a broader agreement between the OPEC producer group. The current supply savings of 1.3 million barrels per day will continue until the end of 2023.
Where are the prices going?
Analysts noted that crude oil prices recovered from 3-month lows in the international markets after a sharp fall in the last two weeks. Crude oil prices recovered after Saudi Arabia and Russia reaffirmed on Sunday that its voluntary cuts remain in place until the end of this year.
Crude prices also recovered after a decline in US oil rigs last week. However, recession fears in the European Union and softening of Israel-Hamas war prize limited oil gains.
”We expect crude oil prices to remain volatile in today’s session. Crude oil has support at $81.30-80.50 and resistance is at $82.70-83.40. In INR crude oil has support at Rs6,740-6,650 while resistance at ₹6,895-6,960,” said Rahul Kalantri, VP Commodities, Mehta Equities.
Updated: 07 Nov 2023, 22:44 IST