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Business News/ Markets / Commodities/  Oil prices score 3-month highs on tighter supplies, Brent reclaims $83/bbl-mark justifying OPEC's April decision
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Oil prices score 3-month highs on tighter supplies, Brent reclaims $83/bbl-mark justifying OPEC's April decision

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a August 21 expiry, were last trading higher by 0.76 per cent at ₹6,510 per bbl, having swung between ₹6,416 and ₹6,532 per bbl during the session so far

An oil platform seen at Maracaibo lake in Cabimas, Venezuela, (AP Photo/Ana Maria Otero-File)Premium
An oil platform seen at Maracaibo lake in Cabimas, Venezuela, (AP Photo/Ana Maria Otero-File)

Oil prices rose to fresh three-month highs on July 25, as signs of tighter supplies and pledges by Chinese authorities to support the world's second-biggest economy lifted market sentiment. The crude oil benchmarks have already clinched four weekly gains in a row, with supplies expected to tighten due to output cuts from the Organization of the Petroleum Exporting Countries and allies or OPEC+. 

Earlier-loading Brent contracts are selling above later loadings, a price structure known as backwardation indicating traders see tight supply, with the six-month spread near a two-and-a-half month high, according to news agency Reuters. In China, the world's second-biggest oil consumer, leaders pledged to step up economic policy support. 

Brent futures gained 31 cents at $83.05 a barrel, after hitting $83.30 earlier, the highest since April 19. US West Texas Intermediate (WTI) crude rose 35 cents at $79.09. The contract earlier rose to $79.34 a barrel, the highest since April 19. Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a August 21 expiry, were last trading higher by 0.76 per cent at 6,510 per bbl, having swung between 6,416 and 6,532 per bbl during the session so far, against a previous close of 6,461 per barrel.

Both US benchmark West Texas Intermediate and Brent closed above their 200-day moving averages in the previous session for the first time in nearly a year. Staying above that barrier may help spur additional buying as it suggests a healthier technical backdrop.

The market’s renewed strength is also manifesting in oil’s key times preads. The gap between the two nearest contracts for WTI was 34 cents a barrel in backwardation — the highest since November — after briefly dipping into the opposite, bearish contango structure last week, according to Bloomberg.

Oil prices hit fresh 3-month highs: What's driving crude oil?

-Oil has pushed higher this month after the OPEC+ pared supplies to help drain global inventories. The move has offset the drag from Federal Reserve Chair Jerome Powell’s campaign of monetary tightening, which is expected to continue with another rate hike this week. 

-In the US, business activity slowed to a five-month low in July, a closely watched survey showed, but falling input prices and slower hiring indicate the Federal Reserve could be making progress on its bid to reduce inflation. Markets anticipate 25-basis-point rate hikes from both the Fed and the European Central Bank this week.

-Russia plans to cut the discount it uses to set taxes on the country's crude oil exports to $20 per barrel from the present rate $25, said Russia's Finance Minister Anton Siluanov.

-Earlier this month, Saudi Arabia announced that it would extend its voluntary cut of one million barrels per day (bpd) for another month to include August, the state news agency said. Russia, seeking to nudge up global oil prices in tandem with Saudi Arabia, also announced that it will reduce its oil exports by 500,000 bpd in August

-The cuts amount to 1.5 per cent of global supply and bring the total pledged by OPEC+ to 5.16 million bpd. The oil producing cartel had already placed cuts of 3.66 million bpd, amounting to 3.6 per cent of global demand, including 2 million bpd agreed last year and voluntary cuts of 1.66 million bpd agreed in April and extended to December 2024.

-"The market is getting more concerned about the trend of tightening oil supplies, and it's becoming more obvious to the naysayers that the expected drop-off in demand isn't happening," Price Futures Group analyst Phil Flynn told Reuters.

 

Technical View

Domestic brokerage firm Religare Broking has mild bullish sentiments on MCX Crude Oil. Religare sees technical levels between 6,500 - 6,720. The turnaround is seen at 6,390.

‘’MACD divergence suggest mild positivity. A break above 6,500 region may strengthen the prices. Whereas, a dip below 6,390 may weaken the prices for the day,'' said Religare Broking.

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Published: 25 Jul 2023, 07:36 PM IST
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