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Business News/ Markets / Commodities/  Oil likely to snap 7-week winning streak as China's economic woes counters tighter supply; Brent drops to $84/bbl
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Oil likely to snap 7-week winning streak as China's economic woes counters tighter supply; Brent drops to $84/bbl

Brent futures rose by about 18 per cent and West Texas Intermediate crude (WTI) by more than 20 per cent in the seven weeks ended August 11, according to Reuters.

Oil benchmarks pared some gains this week, slipping more than three per cent.Premium
Oil benchmarks pared some gains this week, slipping more than three per cent.

Oil prices are on track to settle lower this week following seven straight week of gains, as China's economic slowdown - including the latest property crisis, eclipsed signs of a tighter supply. The seven-week upswing in prices, boosted by supply cuts by the Organization of the Petroleum Exporting Countries and allies (OPEC+), was the longest streak for both benchmarks this year.

Brent futures rose by about 18 per cent and West Texas Intermediate crude (WTI) by more than 20 per cent in the seven weeks ended August 11, with prices hitting their highest levels in months. The benchmarks pared some gains this week, slipping more than three per cent, according to news agency Reuters.

Prices held steady on Friday. Brent crude crept up 20 cents to $84.32 a barrel, while WTI gained 42 cents to $80.81 a barrel. Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for an August 21 expiry, were last trading higher by 0.88 per cent at 6,744 per bbl, having swung between 6,616 and 6,754 per bbl during the session so far, against a previous close of 6,685 per barrel.

What's weighing on oil prices?

China, the world's biggest oil importer, is seen as playing a major role in shoring up oil demand over the rest of the year. However, the country's post-pandemic recovery has been sluggish, weakened by low domestic consumption, plunging factory activity and a debt-ridden property sector. 

These financial contagion risks have raised concerns that China will not meet its annual growth target of five per cent without substantial stimulus measures. China also made a rare draw on crude oil inventories in July, the first time in 33 months it has dipped into storage, according to news agency Reuters.

Another factor weighing on prices are concerns that the US Federal Reserve is not quite finished raising interest rates to tackle inflation. The higher borrowing costs can impede economic growth and in turn reduce overall demand for oil.

Data showed that US crude oil inventories fell by nearly six million barrels last week on strong exports and refining run rates. Weekly products supplied, a proxy for demand, rose to the highest since December. 

 

Technical View

Religare Broking has neutral/sideways sentiments on MCX Crude Oil. ‘’MACD bearish crossover suggest possibility of weakness . Dip below 6,550 ranges may extend the fall. Rebound above 6,720 may offer may strengthen the prices as well,'' said the brokerage firm in its research report. Religare sees technical levels between 6,330 - 7,020. The turnaround is seen at 6,720.

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Published: 18 Aug 2023, 10:20 PM IST
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