Crude oil futures trade higher on supply-side concerns

Crude oil futures traded higher on Friday morning on the back of supply side factors such as the decision of the Organization of the Petroleum Exporting Countries and allies (OPEC+) to stick to a modest rise in the output for June, and the plans of the European Union to impose a ban on the import of crude oil from Russia.

At the time of filing this report, July Brent oil futures were at $111.40, up by 1.14 per cent; and June crude oil futures on WTI were at $108.73, up by 0.43 per cent.

May crude oil futures were trading at ₹8,351 on the Multi Commodity Exchange (MCX) in the initial hour of Friday morning, against the previous close of ₹8,265, up by 1.04 per cent; and June futures were trading at ₹8,265 against the previous close of ₹8,171, up by 1.15 per cent.

Ignoring calls

Ignoring the calls of several countries to increase output, the meeting of OPEC+ on Thursday decided to stick to another modest monthly increase in oil output by 432,000 barrels per day.

Meanwhile, the Judiciary Committee of the US Senate also advanced a Bill that could expose OPEC+ to lawsuits for colluding to boost oil prices.

On Wednesday, President of the European Commission Ursula von der Leyen proposed to phase out import of Russian crude oil in six months, and refined products by the end of 2022. It also proposed to ban all shipping, brokerage, insurance and financing services offered by EU companies for the transport of Russian oil within a month. This proposal requires the nod of all the 27 member countries of the EU. However, some member countries are worried that such a move would impact them.

In his crude oil outlook for the day, Rahul Kalantri, VP (Commodities) of Mehta Equities Ltd, said crude oil jumped to $111.5 a barrel for Brent – the highest price since late March – and over $108 for WTI. He said the OPEC+ meeting refrained from increasing output quotes beyond 423,000 barrel per day for June.

Oil prices dipped at the start of Asian trade on Friday as worries about an economic downturn that could dampen demand for crude vied with concerns over new sanctions from the European Union against Russia, including an embargo on crude oil.

“We expect crude oil prices to remain volatile in today’s session. Crude oil has support at $106.20-$1004.40 and resistance at $110.40-$112.65. In rupee terms, crude oil has support at ₹8,050-7,940, and resistance at ₹8,450–8,620,” he said.

May zinc futures were trading at ₹327.30 on the MCX in the initial hour of Friday morning against the previous close of ₹330.55, down by 0.98 per cent.

Dhaniya slips

On the National Commodities and Derivatives Exchange (NCDEX), May steel long futures were trading at ₹56,300 in the initial hour of Friday morning, against the previous close of ₹56,200, up by 0.18 per cent.

May dhaniya contracts were trading at ₹11,260 on NCDEX in the initial hour of Friday morning against the previous close of ₹11,470, down by 1.83 per cent.

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