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Business News/ Markets / Commodities/  Oil prices steady as US inflation data underpins June rate cut expectations; Brent at $83/bbl
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Oil prices steady as US inflation data underpins June rate cut expectations; Brent at $83/bbl

Brent has hovered comfortably above the $80 mark for three weeks, with the Middle East conflict having only a modest impact on crude flows.

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 were little changed on Thursday, February 29, as January US inflation data reinforced expectations for a rate cut in June. US prices picked up in January, but the annual increase in inflation was the smallest in nearly three years, keeping an interest rate cut from the Federal Reserve on the table.

Brent crude futures for April were down two cents at $83.66 a barrel. The April contract expires on Thursday and the more active May contract was up two cents at $82.17. US West Texas Intermediate crude futures rose 25 cents to $78.79. Brent has hovered comfortably above the $80 mark for three weeks, with the Middle East conflict having only a modest impact on crude flows.

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a March 19 expiry, was last trading 0.05 per cent higher at 6,523 per bbl, having swung between 6,471 and 6,569 per bbl during the session, against a previous close of 6,520 per barrel.

Also Read: Government hikes windfall tax on petroleum crude to 4,600/tonne from March 1

What's affecting crude oil prices?

-The Federal Reserve's preferred inflation gauge, the US personal consumption expenditures (PCE) index, took center stage on Thursday. Reports on consumer and producer prices earlier in February signalled sticky inflation and a guarded approach from Fed policymakers, which prompted investors to push back expectations of rate cuts to June from March.

-Meanwhile, euro zone inflation dipped further this month, strengthening the case for the European Central Bank to start easing interest rates later this year, data from some of the region's biggest economies showed on Thursday.

-High interest rates have been used in many major Western economies to curb inflation, potentially reducing economic growth and oil demand. US crude inventories have risen for a fifth consecutive week, increasing by 4.2 million barrels, the Energy Information Administration said on Wednesday.

-The number of seasonally adjusted initial jobless claims in the US rose by 13,000 to 215,000 in the week ending February 24, according to the Department of Labor data on Thursday. The four-week moving average came in at 212,500, down 3,000 from the previous week.

-An extension to voluntary oil output cuts from the Organisation of Petroleum Exporting Countries (OPEC) producer group is also on the cards. With the demand outlook remaining uncertain, analysts think OPEC will extend the current supply agreement to the end of the second quarter.

-The Middle East conflict shows no signs of abating, meanwhile, with both Israel and Hamas playing down prospects for a truce in their war in Gaza. Qatari mediators have said the most contentious issues remain unresolved.

Also Read: India's Q3 GDP growth at 8.4%, beats D-Street estimates; economy grows at fastest pace in 6 quarters: 5 key highlights

Where are prices headed?

Crude oil exhibited significant volatility, retracting from its recent highs following a surge in US crude oil inventories. According to the U.S. EIA, crude oil inventories in the United States increased by 4.2 million barrels, surpassing the expected build of 3.1 million barrels for the week ending on February 25. 

However, the decrease in gasoline and distillate stocks provided some support to prices at lower levels. The mixed US economic data released on Wednesday failed to bolster crude oil prices, according to analysts.

‘’Expectations are for crude oil prices to maintain volatility. Support levels for crude oil are anticipated to be in the range of $77.50–76.90, with resistance expected at $78.90–79.60. In terms of the INR, crude oil is forecasted to find support between 6,440-6,350, while resistance is seen at 6,590-6,500 for today's session,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

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Published: 29 Feb 2024, 09:59 PM IST
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