Crude oil futures slip as dollar gains strength

A strong US dollar and concerns over demand with Covid cases increasing resulted in crude oil futures trading lower on Wednesday morning.

At the time of filing this report, June Brent oil futures were at $106.82, down by 0.66 per cent, and May crude oil futures on WTI were at $101.89, down by 0.07 per cent.

April crude oil futures were trading at ₹7,701 on Multi Commodity Exchange (MCX) during the initial hours of trading against the previous close of ₹7,785, down by 1.08 per cent, and May futures were trading at ₹7,638 against the previous close of ₹7,720, down by 1.06 per cent.

On Tuesday, US Fed Governor Lael Brainard said she expects methodical interest rate increases and rapid reductions to the Fed's nearly $9 trillion balance sheet. This is aimed at bringing US monetary policy to a ‘more neutral position’ later this year. Further tightening will follow as needed, she said. The statement led the dollar to touch a two-year high on Tuesday. A stronger dollar leads to the oil price being more expensive for those holding other currencies.

Citing the figures of American Petroleum Institute, reports said there was an increase in the crude oil stocks in the US against the expectations of decline in the stock.

Besides, the lockdown in China’s Shanghai was further extended as the authorities are finding it difficult to contain the Covid-19 outbreak. This led to the concerns over the demand for crude oil in one of the major consuming countries in the world.

Losses limited

In his crude oil outlook for the day, Rahul Kalantri, VP (Commodities) of Mehta Equities Ltd, said oil prices eased in volatile trade on Tuesday, pressured by a rising dollar and growing worries that new coronavirus cases could slow demand. But losses were limited by supply concerns due to sanctions on Russia for alleged war crimes.

He said the American Petroleum Institute (API) reported a surprise build this week for crude oil of 1.080 million barrels compared to analyst predictions of a 1.558 million barrel draw.

“We expect crude oil prices to remain volatile to negative in today’s session. Crude oil is having support at $98.40-$95.80 and resistance is at $105.20–107.50. In rupee terms crude oil has support at ₹7,540-7,360, while resistance is at ₹7,950–8,050,” he said.

April aluminium futures were trading at ₹281 on MCX in the initial hour of Wednesday morning against the previous close of ₹279.90, up by 0.39 per cent.

Castor oil slips

On the National Commodities and Derivatives Exchange (NCDEX), April dhaniya futures were trading at ₹12,680 in the initial hours of trading against the previous close of ₹12,598, up by 0.65 per cent.

April refined castor oil (first special grade) contracts were trading at ₹1,439.5 on NCDEX in the initial hour of Wednesday morning against the previous close of ₹1,457, down by 1.20 per cent.

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