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Business News/ Markets / Commodities/  Oil steadies as China data counters OPEC+ cuts; Brent at $86/bbl; check prices

Oil steadies as China data counters OPEC+ cuts; Brent at $86/bbl; check prices

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for an August 21 expiry, were last trading lower by 0.78 per cent at ₹6,880 per bbl, having swung between ₹6,802 and ₹6,915 per bbl.

Brent crude hovers at $86/bbl. (Picture Credits: ONGC official website)Premium
Brent crude hovers at $86/bbl. (Picture Credits: ONGC official website)

Oil prices retreated from lows on China's faltering economic recovery and a stronger dollar took the momentum out of seven weeks of gains on tightening supply. The International Energy Agency (IEA) has warned that the supply curbs by the Organisation of Petroleum Exporting Countries and its allies (OPEC+) might reduce crude oil stocks in the remaining months of this year, potentially raising prices even more, before economic headwinds cap global demand growth in 2024. 

Oil prices have been on the rise as a result of tighter supplies brought on by OPEC+, cutting their oil production. Brent crude futures slipped 42 cents to $86.39 a barrel while US West Texas Intermediate crude edged 31 cents lower to $82.88 a barrel. Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for an August 21 expiry, were last trading lower by 0.78 per cent at 6,880 per bbl, having swung between 6,802 and 6,915 per bbl during the session so far, against a previous close of 6,934 per barrel.

What's weighing on crude oil prices?

The data from the People's Bank of China showed that the new bank loans tumbled 89 per cent from June to the lowest since late 2009, despite the cut in benchmark interest rates raised concerns over the growth of the worlds second largest economy. 

Besides, recent economic numbers including fall in import and exports, shrinking factory inflation and deflation in consumer prices had pointed to a demand slowdown in China.

"Crude has been in overbought territory for some time now, defying expectations of a correction," Vandana Hari, founder of oil market analysis provider Vanda Insights told news agency Reuters. Hari added that the focus had been on US economic optimism, to the exclusion of economic headwinds in the eurozone and China.

China's sluggish economic recovery and a stronger US dollar could depress prices, but OPEC has indicated it would do whatever it takes to tighten supply and stabilise markets, according to analysts.

The US dollar index extended gains after a slightly bigger increase in US producer prices in July lifted Treasury yields despite expectations the Federal Reserve is at the end of hiking interest rates. A stronger dollar pressures oil demand by making the commodity more expensive for buyers holding other currencies.

Meanwhile, supply cuts by Saudi Arabia and Russia, part of OPEC+ are expected to erode oil inventories over the rest of this year, potentially driving prices even higher, said IEA in its report last week.

Last week’s encouraging demand estimates, falling OPEC supply, declining inventories and mitigated inflationary pressure, said Tamas Varga of oil broker PVM, “is a warning signal that unless China joins the party the path upwards will be paved with pitfalls", according to Reuters.

Technical View
Religare Broking has mild-bullish sentiments on MCX Crude Oil. ‘’Mild positivity is still expected in the counter. However, corrective dips to 6,800 ranges may not be ruled out,'' said the brokerage firm in its research report. Religare sees technical levels between 6,550 - 7,330. The turnaround is seen at 6,940.

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Published: 14 Aug 2023, 09:25 PM IST
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