Oil drops 2.5% on demand worries after rise in US gasoline inventories; Brent crashes to $75/bbl | Mint
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Business News/ Markets / Commodities/  Oil drops 2.5% on demand worries after rise in US gasoline inventories; Brent crashes to $75/bbl
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Oil drops 2.5% on demand worries after rise in US gasoline inventories; Brent crashes to $75/bbl

On the Multi Commodity Exchange (MCX), crude oil futures due for a December 18 expiry, was last trading lower by 4.75 per cent at ₹5,791 per bbl, having swung between ₹5,784 and ₹6,068 per bbl during the session so far.

FILE PHOTO: A view shows oil pump jacks outside Almetyevsk in the Republic of Tatarstan, Russia. REUTERS/Alexander Manzyuk/File Photo (REUTERS)Premium
FILE PHOTO: A view shows oil pump jacks outside Almetyevsk in the Republic of Tatarstan, Russia. REUTERS/Alexander Manzyuk/File Photo (REUTERS)

Oil prices fell by 2.5 per cent on Wednesday, December 6, as a bigger-than-expected rise in US gasoline inventories worried markets about demand and outweighed a draw in crude stocks. US gasoline stocks rose by 5.4 million barrels last week, said the Energy Information Administration. 

Brent crude futures fell $1.96, or 2.53 per cent, to $75.27 a barrel and US WTI crude futures fell by $2.19, or 3.03 per cent, to $70.14 a barrel, according to news agency Reuters. On Tuesday, both benchmarks settled at their lowest since July 6, a fourth straight session of losses.

Also Read: Putin to visit Saudi, UAE on December 6 after OPEC+ cuts, host Iran President: What's on agenda?

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a December 18 expiry, was last trading lower by 4.75 per cent at 5,791 per bbl, having swung between 5,784 and 6,068 per bbl during the session so far, against a previous close of 6,080 per barrel.

What's weighing on crude oil?

-Crude inventories fell by 4.6 million barrels, far exceeding the 1.4 million-barrel drop analysts had expected. There is demand destruction coming in from the fuel side. The market is more demand focused than supply focused right now, according to analysts.

-The Organization of the Petroleum Exporting Countries and allies (OPEC+) agreed late last week on voluntary output cuts of about 2.2 million barrels per day (bpd) for the first quarter of 2024. This week, Saudi and Russian officials said the cuts could be extended or deepened beyond March.

-On Wednesday, Russian president Vladimir Putin traveled to the United Arab Emirates (UAE) and Saudi Arabia to meet with the UAE's President Sheikh Mohammed Bin Zayed Al Nahyan and Saudi Crown Prince Mohammed bin Salman. Oil prices and OPEC+ decisions were on the agenda.

-Concerns over China's economic health also weighed on prices, a day after rating agency Moody's lowered the outlook on China's A1 rating to negative from stable. In the US a drop in exports caused the trade deficit to widen in October, which could drag economic growth in the fourth quarter.

Also Read: Stock Picks: ONGC, Oil India among top picks for Motilal Oswal in upstream sector, Indian Oil among OMCs

Where are prices headed?

On Tuesday, oil prices witnessed a nearly five-month decline, influenced by a robust US dollar and concerns regarding demand. This marked the market's fourth consecutive day of decline, fuelled by skepticism over OPEC+'s recently announced voluntary supply cuts, according to analysts.

In September, US crude oil production reached a consecutive record high, highlighting the dilemma faced by Saudi Arabia and its OPEC+ as they strive to reduce output to boost prices. 

The dollar index extended its gains following Moody’s downgrade of China's growth outlook, contributing to a further decrease in oil prices. However, the easing inflation in the European Union and UK, along with geopolitical tensions in the Middle East, could provide some support at lower price levels. 

‘’We anticipate that crude oil prices will remain volatile in today’s session. Crude oil is finding support at $71.85–71.10, with resistance at $73.20-74.00. In terms of INR, crude oil has support at 6,000-5,910, while resistance is at 6,170-6,260,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd. 

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Published: 06 Dec 2023, 10:35 PM IST
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