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India Crude: Hits near-3-mo low on NYMEX cues as Fed rate hike looms

Informist, Thursday, Jul 14, 2022


By Sayantan Sarkar  


MUMBAI – Oil prices fell to a near-three-month low in India today, tracking global contracts as the likelihood of a sharper interest rate hike by the US Federal Reserve in July end weighed on sentiment. 


* The August contract of West Texas Intermediate crude oil on New York Mercantile Exchange slipped to an over-three-month low of $93.28 per bbl. The July contract of crude oil on Multi Commodity Exchange of India hit a near-three-month low of 7,457 rupees per bbl earlier today.  


* Data from the US Labor Department on Wednesday showed inflation in the world’s largest economy reached 9.1% in June. The on-year rise in inflation was at the fastest pace since November 1981. 


* High inflation in the US sparked fears that the US central bank may raise interest rates by as much as 100 basis points at its meeting later this month. Rising interest rates may diminish demand for crude oil as the rate of borrowing for the public goes up. The US is also the world’s largest consumer of crude oil. 


* “Crude oil prices fell on Thursday as investors weighed tight supplies against the prospect of a large US rate hike that could stem inflation and curb crude demand,” said Tapan Patel, senior analyst at HDFC Securities. 


* At 1749 IST:

 –July contract on the Multi Commodity Exchange of India was down 1.4% at 7,557 rupees per bbl.

 –August contract on the New York Mercantile Exchange was down 2.0% at $94.31 per bbl.


* In addition, new COVID-induced curbs in China also weighed on sentiment despite supply remaining tight. 


* Furthermore, the US Energy Information Administration said crude oil inventories, along with distillates and petroleum stocks in the country, rose in the week ended Friday, signalling weakening of demand. 


* However, supply in global market remains tight with Libya’s production falling and Russia’s oil exports restricted. Moreover, the Organization of the Petroleum Exporting Countries’ spare output capacity has dwindled significantly over the past several months. 


* “Risks are rising that oil stages a corrective rally carrying both contracts (WTI and Brent) back above USD 100.00 a barrel once again,” Jeffery Halley, senior analyst Asia Pacific, OANDA, said in a note. 


* Outlook for the evening session by HDFC Securities:

 –MCX contract is seen at 7,450-7,850 rupees per bbl

 –NYMEX contract is seen at $92-$98 per bbl 




US$1 = 79.87 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT


Edited by Deepshikha Bhardwaj



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Source: Cogencis

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