Crude oil futures traded marginally higher on global exchanges Tuesday morning as the market expected that there would be no aggressive rate hikes in the US following weaker business activity data.
At 10.02 am on Tuesday, the December Brent oil futures were at $93.50, up by 0.26 per cent; and November crude oil futures on WTI were at $84.91, up by 0.39 per cent.
November crude oil futures were trading at ₹7,048 on the Multi Commodity Exchange (MCX) in the early trade against the previous close of ₹7,047, up by 0.01 per cent; and December futures were trading at ₹7,003 as against the previous close of ₹6,996, up by 0.10 per cent.
According to the S&P Flash US Composite PMI, released on October 24, the private firms in the US recorded a further downturn in output at the start of the fourth quarter. The fall in business activity was solid and stronger than in September, as service providers signal a quicker decline, it said. Manufacturers, on the other hand, saw output rise for the second month running, albeit marginally.
The headline, Flash US PMI Composite Output Index, registered 47.3 in October, down from 49.5 in September. Except for the initial pandemic period, the rate of decrease was the second-fastest since 2009, it said.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said the US economic downturn gathered significant momentum in October, while confidence in the outlook also deteriorated sharply. The decline was led by a downward lurch in services activity, fuelled by the rising cost of living and tightening financial conditions.
The surveys present a picture of the economy at increased risk of contracting in the fourth quarter at the same time that inflationary pressures remain stubbornly high, Chris Williamson said, adding: “However, there are clearly signs that weakening demand is helping to moderate the overall rate of inflation, which should continue to fall in the coming months, especially if interest rates continue to rise.”
Analysts felt that these developments indicate that the decisions of the US Fed Reserve to increase interest rates have been working, and this may bring down the pace of rate hikes. They opined that this is a positive signal for the oil demand in the market.
Oil prices were also supported by the proposed 2 million barrels a day production cut by OPEC (Organization of Petroleum Exporting Countries) and its allies, known as OPEC+, from November. Apart from this, sanctions on the import of Russian oil by the European Union will start in December.
However, China’s September crude oil import data impacted the demand outlook in the global market. According to market reports, China imported around 9.79 million barrels a day of crude oil in September, 2 per cent below the last year’s figures. Reports noted that independent refiners curbed throughput amid thin margins and lacklustre demand for the products.
November natural gas futures were trading at ₹484.60 on MCX in the initial trading hour of Tuesday morning against the previous close of ₹473.50, up by 2.34 per cent.
On the National Commodities and Derivatives Exchange (NCDEX), November turmeric (farmer polished) contracts were trading at ₹7,650 in the early deals against the previous close of ₹7,700, down by 0.65 per cent.
November steel long futures were trading at ₹48,860 on NCDEX in the initial trade against the previous close of ₹49,110, down by 0.51 per cent.