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Brent crude oil futures briefly topped $118 a barrel and WTI crude oil futures ruled above $114 a barrel on Thursday morning as OPEC (Organization of the Petroleum Exporting Countries) decided to stick to its plans of adjusting upward monthly overall production by 4,00,000 barrels a day for April and the US EIA (Energy Information Administration) reporting a fall in the crude oil inventories.
The Russia-Ukraine war and the subsequent sanctions on Russia by various countries added to the supply disruptions in the already tight global market. May Brent oil futures were at $117.29, up 11.5 per cent and April crude oil futures on WTI at $114.3, up 3.35 per cent.
March crude oil futures were trading at ₹8,651 on Multi Commodity Exchange (MCX) during the initial hours of Thursday morning against the previous close of ₹8,243, up 4.95 per cent; and April futures were trading at ₹8380 against the previous close of ₹8001, up 4.74 per cent.
The 26th OPEC and non-OPEC ministerial meeting, which was conducted via videoconference on March 2, pointed to a well-balanced market. It noted that the current volatility in the market is not caused by changes in market fundamentals but by current geopolitical developments.
Following this, the OPEC and participating non-OPEC oil-producing countries decided to reconfirm the production adjustment plan and the monthly production adjustment mechanism approved at the 19th ministerial meeting and the decision to adjust upward the monthly overall production by 4,00,000 barrels a day for April 2022.
Weekly petroleum status
Meanwhile, US EIA’s Weekly Petroleum Status Report said that US commercial crude oil inventories (excluding those in the strategic petroleum reserve) decreased by 2.6 million barrels from the previous week. At 413.4 million barrels, US crude oil inventories are about 12 per cent below the five-year average for this time of year.
US EIA report said that crude oil imports averaged about 6.2 million barrels a day over the past four weeks, 9.4 per cent more than the same four-week period last year.
In his crude oil outlook Rahul Kalantri, VP (Commodities) of Mehta Equities Ltd, said crude oil settled on a positive note in the international markets on Wednesday. WTI crude settled at $110.60 per barrel and Brent settled at $114.56 per barrel.
Domestic markets also settled on a positive note at ₹8,282 per barrel, up by 4.77 per cent. OPEC+ has decided to maintain an increase in output by 4,00,000 barrels a day despite the price surge to record highs, ignoring the Ukraine crisis during their talks and snubbing calls from consumers for more oils.
“We expect WTI prices could test $120 a barrel and Brent prices could test $125 a barrel in the upcoming sessions. Crude oil is having support at $106.80-104.00 and resistance are at $104.40-118.00 in today’s session. In rupee terms crude oil has support at ₹8,002-7,723; while resistance is at ₹8,538-8,795,” he said.
Speaking to the CNBC television channel, Peter McGuire, CEO of XM Australia, said there is a chance of crude oil hitting levels of $125 a barrel.
Demand destruction?
Quoting Ehsan Khoman, Head of Emerging Markets Research of Mitsubishi UFJ Financial Group (MUFG), a Reuters report said soaring Brent crude oil prices are tracking the same path as in 2007-08 when they hit a record $150 a barrel before demand destruction kicked in and prices crashed in a global recession.
"Oil prices have become so disconnected from the marginal cost of supply – given the extreme shortage of oil – that they are marching to the level where demand destruction becomes prevalent," Ehsan Khoman said in the report.
March natural gas contracts were trading at ₹369.40 on MCX in the initial hour of Thursday morning against the previous close of ₹357.70, up by 3.27 per cent.
Turmeric gleams
On the National Commodities and Derivatives Exchange (NCDEX), April turmeric (farmer finished) futures were trading at ₹9,570 in the initial hour of Thursday morning against the previous close of ₹9,388, up 1.94 per cent; and May contracts were trading at ₹9620 against the previous close of ₹9,438, up 1.93 per cent.
March steel long futures were trading at ₹54,810 on NCDEX in the initial hour of Thursday morning against the previous close of ₹53,990, up 1.52 per cent; and April contracts were trading at ₹54,980 against the previous close of ₹54,180, up 1.48 per cent.
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