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Business News/ Markets / Commodities/  Oil rises $1 as US dollar slips to one-week low, investors shift focus to global economy; Brent at $88/bbl
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Oil rises $1 as US dollar slips to one-week low, investors shift focus to global economy; Brent at $88/bbl

Brent crude and US WTI had had dropped by more than a dollar early in the session on easing tensions between Israel and Iran, along with nagging concerns on demand from top oil importer China.

Brent crude futures rose $1.29, or 1.5 per cent, to $88.29 per barrel.Premium
Brent crude futures rose $1.29, or 1.5 per cent, to $88.29 per barrel.

Oil prices rose a dollar a barrel on Tuesday, April 23, as the US dollar index fell to its lowest in over a week and as oil investors shifted focus away from the ongoing geopolitical issues in the Middle East to the state of global economies. The US dollar index weakened after latest S&P Global data showed US business activity cooled in April to a four-month low on a weaker demand.

Brent crude futures rose $1.29, or 1.5 per cent, to $88.29 a barrel. US West Texas Intermediate crude futures rose $1.32, or 1.6%, to $83.22 a barrel., according to news agency Reuters. Coming to domestic prices, crude oil futures rose 1.35 per cent to 6,926 per barrel on the multi commodity futures (MCX). 

Also Read: India's crude oil consumption up 4.6% in FY24, output rises marginally at 0.6%, imports steady: PPAC

What's driving crude oil prices?

-A cheaper greenback typically lifts demand for dollar-denominated oil from investors holding other currencies. Both crude oil contracts had dropped by more than a dollar early in the session on easing tensions between Israel and Iran, along with nagging concerns on demand from top oil importer China. 

-More support for prices came from Euro Zone data that showed business activity expanding at the fastest pace in nearly a year this month. Analysts said that the market has been under pressure from little to no growth out of the Euro Zone, so anything showing improvement should be supportive.

-Investors are awaiting US gross domestic product figures and March personal consumption expenditure data, the Fed's preferred inflation gauge. A low GDP number of under three per cent could cool the Fed's nerves some and provide less pressure to commodities. A stronger than three per cent reading could cause the dollar to rally, which would put more pressure on commodities. 

Also Read: US inflation beats Wall Street estimates, rises 0.4% in March; Fed's June rate cut hopes fade away

Where are oil prices headed?

Analysts noted that crude oil prices experienced volatility as Iran stated they currently have no immediate plans to retaliate against Israel. This de-escalation in the Middle East reduced the war premium on crude oil. US crude oil stocks surged in the last two weeks, further limiting crude oil gains. Despite these factors, 

‘’Tight global supply conditions and ongoing geopolitical tensions continue to provide some support for oil prices at lower levels. Expectations suggest crude oil prices will continue to fluctuate. Support for crude oil stands around $81.20–80.40, with resistance at $82.90-83.60. In terms of INR, crude oil finds support around 6,730-6,640, while resistance is seen at 6,910-7,000,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

Also Read: Oil rises 16% YTD on Middle-East crisis: How will the fresh spike impact India and world markets—Explained

Demand concerns still prevails as higher of longer interest rates could derail the steady global economic growth. Prices may see some floor as well, ahead of the inventory data and expectation of higher demand ahead of the summer driving season, according to Pranav Mer, Vice President, EBG - Commodity & Currency Research, JM Financial Services. ‘’Technically, prices are likely to face resistance around 6,925/ 7,050, and support at 6,720/ 6,600,'' added Mer.

Oil prices experienced a minor setback earlier followed by stabilization as global markets closely monitored the evolving dynamics between Israel and Iran, with signs indicating a reduction in hostilities. The focus remains on Israel's objectives, including the elimination of what it perceives as the final bastion of Hamas in Gaza and the liberation of remaining hostages, according to analysts.

‘’These pursuits are expected to maintain heightened tensions in the region, influencing market sentiments. Brent crude hovered above $87 per barrel, having slipped marginally by 0.3 per cent on Monday, while WTI remained close to $82. Analysts anticipate crude oil prices to enter a phase of consolidation, potentially marking a period of stability in the near term,'' said Riya Singh, Research Analyst – Currency and Commodities, Emkay Global Financial Services.

​Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

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ABOUT THE AUTHOR
Nikita Prasad
Nikita covers business news and has been producing news on digital platforms since 2018. She writes on economy, policy, markets, commodities, industry. Her core areas of interests include infrastructure, energy, oil and gas, railways, and transport/mobility. She has worked for business news channels like Moneycontrol, NDTV Profit, and Financial Express in the past. If you have story ideas/pitches/reports or quotes/views to share, reach her at nikita.prasad@htdigital.in.
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Published: 23 Apr 2024, 11:06 PM IST
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