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Business News/ News / India/  Oil prices continue uptrend, traders eye Fed meet

New Delhi: International crude oil prices continued to trade higher on Monday amid supply concerns due to the ongoing output cuts by Saudi Arabia and Russia.

Analysts said that traders would keenly watch the meeting of US Federal Reserve’s Federal Open Market Committee scheduled this week.

Around 1.30 pm, the November contract of Brent on the Intercontinental Exchange was trading at $94.26 per barrel, 0.35% higher than its previous close. The October contract of West Texas Intermediate (WTI) on the NYMEX was trading at $91.21 a barrel, higher by 0.48% from its previous close.

Ravindra Rao, head of commodity research at Kotak Securities said crude futures witnessed the third consecutive weekly gain as extension of the supply curbs by Saudi Arabia and Russia tightened the oil market outlook.

He also noted that the International Energy Agency (IEA) projected that demand will eclipse supply by 1.2 million barrels per day (mpbd) on average during the second half of the year, while OPEC report showed that global oil markets face a supply shortfall of 3.3 mbpd next quarter, potentially the biggest deficit in more than a decade.

“Data from China showed that economy gathered pace in August, while odds of a US soft landing remains high, keeping the prices buoyed. Fed policy outlook and western Manufacturing PMIs can be closely watched for the week," Rao added.

Rahul Kalantri, vice president, commodities, Mehta Equities Ltd said: “Crude oil prices are showing strength since OPEC+ decided to extend its output cuts until the end of 2023. The U.S. economic data released last week was also better than expected and supported crude oil prices.“

He further said that the People’s Bank of China cutting its reserve requirement ratio (RRR) by 25 basis points last week to support its economy also aided crude prices. Kalantri said that crude oil prices are expected to remain volatile during the day.

Rising crude prices are significant for India as the country imports around 85% of its energy requirement. On the back of the recent rise in prices, the Centre on Friday increased the windfall tax on the sale of domestic crude oil to 10,000 per tonne, from 6,700 per tonne.

The Indian crude oil basket also has increased in the past three months. In June, it averaged $74.93 per barrel and as on 15 September, it stood at $95.45 per barrel. The Indian basket of crude oil represents a derived basket comprising of sour grade (Oman & Dubai average) and sweet grade (Brent Dated) of crude oil processed in Indian refineries in the ratio of 75.62:24.38.

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Updated: 18 Sep 2023, 02:19 PM IST
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