Crude oil futures traded lower on Wednesday as the market feared that the energy demand is likely to be affected due to the risks of global recession.
At 10.01 am on Wednesday, December Brent oil futures were at $93.81, down by 0.51 per cent, and November crude oil futures on WTI were at $88.78, down 0.64 per cent.
October crude oil futures were trading at ₹7,308 on Multi Commodity Exchange (MCX) in the initial trading hour on Wednesday against the previous close of ₹7,367, down by 0.80 per cent, and November futures were trading at ₹7,229 against the previous close of ₹7,282, down by 0.73 per cent.
In its World Economic Outlook, IMF (International Monetary Fund) said global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering Covid pandemic all weigh heavily on the outlook.
Weakest growth profile
“Global growth is forecast to slow from 6 per cent in 2021 to 3.2 per cent in 2022 and 2.7 per cent in 2023. This is the weakest growth profile since 2001, except for the global financial crisis and the acute phase of the Covid pandemic. Global inflation is forecast to rise from 4.7 per cent in 2021 to 8.8 per cent in 2022 but to decline to 6.5 per cent in 2023 and to 4.1 per cent by 2024,” it said.
IMF outlook said monetary policy should stay the course to restore price stability, and fiscal policy should aim to alleviate the cost-of-living pressures while maintaining a sufficiently tight stance aligned with monetary policy.
Any slowdown in the economy will impact the demand for energy in the global market.
Added to this, market is also expecting that the US Federal Reserve would adopt an aggressive monetary tightening policy to control the inflation in that economy.
A strong dollar and China’s moves to control Covid cases in that country also impacted the demand for crude oil in the market. It may be mentioned here that Shanghai and Shenzhen regions of China have intensified Covid testing after the number of cases increased in those regions recently. China is a major consumer of crude oil.
In his daily market outlook, Prathamesh Mallya, AVP (Research, Non-Agri Commodities, and Currencies) of Angel One Ltd, said: “We expect crude to trade lower towards ₹7180 levels, a break of which could prompt the price to move lower to ₹7000 levels.”
October aluminium futures were trading at ₹198.15 on MCX in the initial trading hour of Wednesday morning against the previous close of ₹199.35, down by 0.60 per cent.
On the National Commodities and Derivatives Exchange (NCDEX), October steel long contracts were trading at ₹50,220 in the initial trading hour on Wednesday against the previous close of ₹49,540, up by 1.37 per cent.
October jeera futures were trading at ₹23,440 on NCDEX in the initial trading hour on Wednesday against the previous close of ₹23,685, down by 1.03 per cent.