By Jigar Trivedi
WTI crude oil futures fell for the second consecutive week, down more than 6% and closed at $97.6 per bbl, as prospects of demand sapping lockdowns in China and recession fears in the US outweighed tight supplies. US gasoline demand, the major demand sector for crude oil, tumbled last week to 8.06 million barrels a day, the lowest seasonally since 1996. However, oil prices pared early losses and bounced back from a four-month low, as Saudi Arabia was not expected to unilaterally announce any oil production increase after Biden’s visits, while prospects of a less aggressive tightening from the Fed lent further optimism to oil bulls.
Meanwhile, US crude oil inventories rose by 3.254 million barrels in the week ended 8th July, after an 8.235 million increase in the previous period, while gasoline stocks rose by 5.825 million barrels, and distillate stockpiles increased by 2.668 million barrels. Along with that, US weekly production fell to 12 mbpd from 12.1 mbpd in the previous week, which also underpinned prices at lower levels.
MCX Crude oil August futures outlook
We might see further weakness in crude oil prices amid rising covid cases in China. China, the world’s second-largest oil consumer, on Sunday reported 691 new COVID cases for Saturday, up from 547 the previous day, with locally transmitted cases at the highest since 23rd May. Meanwhile, Shanghai has announced to hold mass Covid testing exercises from 19 ? 12th July, which raises concerns about further lockdowns, hurting fuel demand. On top of that, US energy envoy Amos Hochstein indicated confidence that major producers in the Middle East have spare capacity and are likely to boost supplies following President Joe Biden’s visit to the region.
Moreover, the new chief of Libya National Oil Corp. said the country’s oil output will resume from all shuttered fields and ports after meeting groups that have blockaded the facilities for months, which led to output falling to a 20-month low of 610,000 bpd in June. We expect MCX Crude oil August futures to decline towards Rs 7,300 per bbl this week.
(Jigar Trivedi, Manager — Non-Agro Fundamental Research, Anand Rathi Shares & Stock Brokers. Views expressed are the author’s own.)