Oil crawls back towards 7-week low-mark after US Fed keeps rates at 23-year high; Brent at $83/bbl
- Crude prices came under pressure after US data pointed to persistent labour market strength which further dimmed prospects of an early decline in US interest rates.
Oil edged back towards the previous day's seven-week low-mark on Thursday, May 2, paring earlier gains, after US data pointed to persistent labour market strength which further diminished hopes of early decline in US interest rates.
Brent crude futures for July were up 40 cents, or 0.5 per cent, at $83.84 a barrel heaving earlier touched a session peak of $84.44. US West Texas Intermediate (WTI) crude for June was 27 cents, or 0.3 per cent, firmer at $79.27, off a high for the day of $79.90. Coming to domestic prices, crude oil futures declined 0.08 per cent lower at ₹6,617 per barrel on the multi commodity exchange (MCX).
What's dragging crude oil prices?
-On Wednesday, crude oil prices fell more than three per cent to a seven-week low after the US Federal Reserve kept interest rates steady and warned of stubborn inflation, which could curtail economic growth this year and limit oil demand increases.
-Data also showed US jobless claims held steady at lower levels last week as the labour market remains fairly tight, ahead of April's employment numbers. The oil market was supported by speculation that if WTI falls below $79, the US will move to build up its strategic reserves, according to analysts.
-Crude oil rates also traded under pressure by data from the Energy Information Administration (EIA) showing an unexpected increase in the US crude inventories, which were at their highest mark since June 2023.
-The Organisation of Petroleum Exporting Countries and its allies (OPEC+) have yet to begin formal talks on extending voluntary oil output cuts beyond June, three sources from OPEC producers told news agency Reuters that such an extension could be agreed if demand fails to pick up.
-In the Middle East meanwhile, expectations grew that a ceasefire agreement between Israel and Hamas could be in sight after a renewed push led by Egypt, even as Israeli Prime Minister Benjamin Netanyahu has vowed to proceed with a long-promised assault on the southern Gaza city of Rafah.
Also Read: India's crude oil consumption up 4.6% in FY24, output rises marginally at 0.6%, imports steady: PPAC
Where are oil prices headed?
WTI crude oil futures extended declines for the fourth consecutive day and plunged almost three per cent on Wednesday. ‘’OPEC’s crude production steadied in April, at 26.81 mbpd, about 50,000 bpd less than March, as minor increases by Libya and Iraq were offset by reductions in Iran and Nigeria. With improving stability in middle-east, we might see weakness in prices,'' said Kaynat Chainwala, Senior Manager-Commodity Research, Kotak Securities.
Analysts also added that crude oil prices exhibited significant price volatility, plummeting to a two-month low amidst a surprise build in US stocks. Profit-taking in the dollar index and the US Federal Reserve's indication of no further rate hikes could lend support to prices at lower levels.
‘’We anticipate crude oil prices to remain volatile. Crude oil is supported at $78.10–77.20, with resistance at $79.90–80.70. In terms of the Indian Rupee (INR), crude oil finds support at ₹6,540–6,460 and resistance at ₹6,690–6,760,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
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