Oil slips on profit booking, IEA’s supply glut projection

Higher supplies would upend the current Opec and allies' market management strategy, which has implemented production cuts at support prices.

Rituraj Baruah
First Published14 Jun 2024, 11:08 AM IST
Prices rose after the Opec and its allies stuck to their previous projection of relative demand in 2024
Prices rose after the Opec and its allies stuck to their previous projection of relative demand in 2024(Image)

New Delhi: International crude oil prices fell on Friday as traders booked profits after a largely positive trend during the week. The International Energy Agency's projection of a massive supply glut by 2030 may also have weighed on prices, analysts said.

Amid high volatility, prices rose through most of the week. Brent which had ended below $80 per barrel mark last week, is currently trading above $82 per barrel.

Organisation of the Petroleum Exporting Countries (Opec) and its allies stuck to their previous projection of relative demand in 2024, and Goldman Sachs estimated robust fuel demand in the US this summer.

The August contract of Brent on the Intercontinental Exchange was trading at $82.36 per barrel, lower by 0.47% from its previous close. The July contract of West Texas Intermediate on the Nymex fell 0.61% to $78.14 per barrel.

Also Read: A new excise law to refine 80-year-old Act will make life easier for oil firms

Further, the decision of the US Federal Reserve to keep the key benchmark interest rates unchanged at 5.25-5.50% for the seventh straight meeting played its part in the oil market. The Fed's move on interest rates lifted hopes for better demand.

On the supply side, the IEA has estimated that by the end of this decade, there will be excess supplies compared to demand.

"A ramping up of world oil production capacity, led by the United States and other producers in the Americas, is expected to outstrip demand growth over the 2023-2030 forecast period and inflate the world’s spare capacity cushion to levels that are unprecedented, barring the Covid-19 period. Total supply capacity rises by 6 mb/d (million barrel per day) to nearly 113.8 mb/d by 2030, a staggering 8 mb/d above projected global demand of 105.4 mb/d," IEA said.

It said that the higher supplies would upend the current Opec and allies' market management strategy, which has implemented production cuts to support prices.

Rahul Kalantri, vice-president, commodities, Mehta Equities Ltd said prices are expected to remain volatile in the current session as traders assess the Fed's move and outcome of geopolitical conflicts.

Also Read: Boiling oil menaces macro math, market outlook

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First Published:14 Jun 2024, 11:08 AM IST
HomeMarketsCommoditiesOil slips on profit booking, IEA’s supply glut projection

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