Supply-side factors boost crude oil futures on global exchanges

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Crude oil futures traded higher on global exchanges at the start of trading Friday morning. Prices were influenced by factors such as the European Union‘s proposal to ban the import of Russian oil on the supply side and the impact of the weak global economic outlook on the demand side.

As of 10:04 a.m. Friday, July Brent oil futures were at $109.51, up 1.86%; and June crude oil futures on WTI were at $108.05, up 1.81%.

May crude oil futures were trading at ₹8,344 on the Multi Commodity Exchange (MCX) in the first hour of Friday morning against the previous close of ₹8,174, up 2.08%; and June futures traded at ₹8,236 from the previous close of ₹8,069, up 2.07%.

Tight supply

Market reports noted that if the European Union’s proposal to ban the import of crude oil from Russia materializes, it will impact supply as markets are already facing a tight supply situation. .

Some Western countries have already banned the import of crude oil from Russia after its war with Ukraine. It may be noted here that Russia also recently sanctioned 31 companies based on a retaliatory response to sanctions imposed by Western nations.

Demand-side factors such as the continued Covid-induced lockdowns in China (a major consumer of crude oil globally) and the impact of rising inflation and rates on global economic growth have contributed to control prices.

Saish Sandeep Sawant Dessai, Research Associate, Base Metals, Angel One Ltd, said crude prices continued to rise slightly like Thursday. Brent crude ended up 1.08% and NYMEX crude ended up 0.40% as supply concerns and geopolitical tensions in Europe took precedence over economic fears.

An impending European Union ban on Russian oil has been delayed as Hungary and a few other European countries oppose the ban as it would disrupt Europe’s economy too much, as it imports 3.5 million barrels of oil and Russian petroleum products every day.

“Prolonged shutdowns across China, leading to lower demand growth as the country looks set to lock down the capital of Beijing, are causing the world’s second-largest consumer of oil to slow significantly. On the other hand, l OPEC cut its forecast for global oil demand growth in 2022 for a second straight month, citing the impact of Russia’s invasion of Ukraine, rising inflation and a resurgence of the coronavirus variant Omicron in China,” he said.

In his outlook for the day, he said that the increase in geopolitical tensions between Russia and Ukraine, when the latter blocked the flow of Russian gas to Europe by closing a major transit route, will lead to a shortage of gas. ‘supply. May zinc futures traded at ₹307.50 on MCX in the first hour of Friday morning against the previous close of ₹306.30, up 0.39%.

Base metals down

Saish Sandeep Sawant Dessai said industrial base metals ended on a negative note on Thursday amid the surge in the dollar, which rose above all-time highs. Copper prices slipped more than 1.5% as they fell to 7-month lows as a slowing global economy will have little to no demand for the metals.

With soaring inflation and central banks around the world heading for a tightening of monetary policy and fears for growth also sent global stock markets tumbling to one-year lows, he said. declared.

Meanwhile, the dollar hit a new 20-year high against some of its other major rivals, which ended up making dollar-priced metals more expensive for buyers of other currencies. Another headwind to metal prices has been the Covid shutdowns in China, the top consumer of metals, which has seen manufacturing activity contract and slow export growth and stagnant imports.

In his outlook for the day, he said, “We expect copper to trade lower towards the ₹729 levels, which may prompt the price to drop further to the ₹710 levels.”

Castor Gains

On the National Commodities and Derivatives Exchange (NCDEX), May castor bean futures were trading at ₹7,328 in the first hour on Friday morning against the previous close of ₹7,294, up 0.47 %.

May steel long contracts were trading at ₹53,600 on NCDEX in the first hour on Friday morning against the previous close of ₹54,480, down 1.62%.

Published on

May 13, 2022

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