Informist, Monday, Oct 25, 2021
By Sayantan Sarkar
MUMBAI – Crude oil prices in India and the overseas market rose to new seven-year highs today due to tight supply and robust demand for the fuel.
* The rupee’s weakness against the dollar further boosted prices as a weaker Indian unit makes commodities priced in the greenback more expensive.
* Oil demand has been robust in recent months as economic activities around the world have picked up pace following the easing of COVID-19 induced curbs. The global shortage in the coal and natural gas markets and a switch to oil-based fuel by power generators has also lifted demand.
* The inventory level at Cushing, Oklahoma in the US was just over 30 mln barrels last week, a critically low level. Crude inventory at Cushing is the delivery point for West Texas Intermediate oil, which is traded on the New York Mercantile Exchange. Domestic crude contracts on the Multi Commodity Exchange of India track NYMEX oil prices.
* At 1715 IST
–The November crude oil contract on the MCX was up 1.8% at 6,254 rupees per barrel. The contract had risen to 6,368 rupees per bbl, its highest level since July 2014.
–The December contract on NYMEX was up 0.9% at $83.25 per bbl, and had hit a seven-year-high of $84.75 per bbl earlier today.
* Crude prices had risen in recent weeks due to additional demand for the fuel, as shortages of coal and gas in the market led power generators to switch to oil.
* In addition, supply from the Organization of the Petroleum Exporting Countries and allies has not been able to meet additional demand as the cartel continued to pump way below their collective capacity. In an interview with Bloomberg, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman warned against taking the rise in prices for granted because the pandemic could still hit demand.
* Renewed lockdowns in Russia and China seem to confirm the cautiousness of Saudi Arabia’s energy minister. However, according to Commerzbank AG, the impact of these lockdowns may not be that significant.
* Outlook for the evening session by Tapan Patel, senior analyst at HDFC Securities:
–The MCX contract is seen at 6,250-6,450 rupees per bbl
–The NYMEX contract is seen at $82-$87 per bbl
End
US$1 = 75.07 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Snigdha Kuttikat
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Source: Cogencis