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MCX Crude oil July futures may fall to Rs 8,250/bbl this week; heads for 1st monthly fall since November 2021

Crude oil is headed for its first monthly decline since November 2021, as investor sentiments were dampened over a potential global slowdown spurred by aggressive interest rate hikes

crude oil
Oil revenues have helped Putin fund his war in Ukraine

By Jigar Trivedi

WTI crude futures ended the previous week marginally down and closed at $107.6 per bbl, paring early losses as supply concerns once again outweighed demand worries. Sentiments were boosted as production in Libya was shut down because of political unrest, making it difficult for OPEC to meet the production targets. Adding to the woes, Nigeria’s petroleum minister said OPEC+ is running out of capacity to pump more oil, including its biggest member Saudi Arabia. OPEC’s spare capacity is running low and that too at a faster pace, after the cartel ramped out the output for July. 

Still, prices were under pressure in the previous week on fears that aggressive monetary tightening by major central banks in order to curb decade’s high inflation might induce a recession and dampen oil demand. Meanwhile, EIA crude oil inventories for the week ended 17th June have been delayed due to technical issues, while, industry data showed inventories rose by 5.06 million barrels for the same period. Money managers have decreased their bullish Nymex WTI crude oil bets by 31,972 net-long positions to 234,012, the least bullish in more than two years, weekly CFTC data showed. 

Crude oil outlook

Crude oil is headed for its first monthly decline since November 2021, as investor sentiments were dampened over a potential global slowdown spurred by aggressive interest rate hikes worldwide to combat surging inflation, which might hurt demand. Oil prices might be volatile for the week, ahead of the G7 meeting, where the leaders of the nations are expected to discuss options for tackling rising energy prices by putting a price cap on Russian crude and oil products exports, aimed at curbing Russia’s revenue while reducing the damage to other economies. 

Oil revenues have helped Putin fund his war in Ukraine. Meanwhile, US and Iran will reportedly restart talks over reviving a nuclear deal in the coming days, with the EU acting as a mediator, which might further add pressure on oil. The delayed EIA inventories for the week ended 17th June will be released between 27-30th June according to Bloomberg. We expect MCX Crude oil July futures to decline towards Rs.8,250 per bbl for the week.

(Jigar Trivedi, Manager — Non-Agro Fundamental Research, Anand Rathi Shares & Stock Brokers. Views expressed are the author’s own.)

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