Oil prices fell more than 2 percent in the previous session as investors remained cautious about the depth of supply cuts announced by the Organization of the Petroleum Exporting Countries and its allies (OPEC+). Concerns about sluggish global manufacturing also weighed on market sentiment.
Brent crude futures for February settled $1.98, or 2.45 percent, at $78.88 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell $1.89, or 2.49 percent, to $74.07 a barrel. For the week, Brent posted a decline of about 2.1 percent, while WTI lost more than 1.9 percent, according to news agency Reuters.
At home, on the Multi Commodity Exchange (MCX), crude oil futures for the December 18 settlement settled lower by 0.8 percent at ₹6,231 per bbl, having swung between ₹6,210 and ₹6,409 per bbl during the session, against a previous close of ₹6,281 per barrel.
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What weighs on crude oil prices?
-OPEC+ producers agreed on Thursday to remove about 2.2 million barrels per day (bpd) of oil from the global market in the first quarter of next year, with the total including Saudi Arabia’s delivery and Russia’s 1.3 million barrels of current voluntary cuts. Traders viewed the announcement with some skepticism, analysts say.
-OPEC+, which pumps more than 40 percent of the world’s oil, is cutting output after prices fell from around $98 a barrel in late September on concerns about the impact of sluggish economic growth on fuel demand.
-The cuts agreed by OPEC+ on Thursday are voluntary, so there was no collective review of OPEC+ production targets. The voluntary nature of the cuts led to some skepticism about whether or not producers would fully implement them, and also from what basis the cuts would be measured.
-In the United States, the Chairman of the Federal Reserve Jerome Powell said that the central bank will “carefully” move interest rates, because risks of “under- and over-tension are becoming balanced.” US manufacturing remained weak and factory employment fell in November, according to a survey.
-Investors are keeping an eye on global manufacturing activity, which remained weak during the month due to poor demand, according to surveys. On the supply side, the United States on Friday imposed additional sanctions related to the price cap on Russian oil, targeting three entities and three tankers.
– On Wednesday, talks to extend a week-long truce between Israel and the Palestinian militant group Hamas collapsed, prompting a resumption of the war in Gaza. The conflict initially supported oil prices due to concerns that any escalation that involved oil producers could disrupt supply. So far, the conflict has had no major impact on global oil flows.
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Where are the prices going?
A rebound in the dollar index from near 4-month lows also pushed oil prices lower. Crude oil prices also fell as production cuts announced by OPEC+ came in lower than market expectations, according to analysts.
” Output cut is also voluntary and the market does not expect 100 percent output cut compliance. Crude oil has support at $74.85-74.10 and resistance at $76.50-77.20. In INR terms, crude has support at Rs6,320-6,240 while resistance is at ₹6,480-6,550,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
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Updated: 02 Dec 2023, 19:25 IST