Crude oil traded lower on Thursday morning following weak market sentiments. This followed the decision of the US Federal Reserve to increase the interest rates by 25 basis points, and the statement of US Treasury Secretary Janet Yellen that her government is not considering a “blanket insurance” for bank deposits in the US.

At 9.50 am on Thursday, May Brent oil futures were at $76.03, down by 0.86 per cent, and May crude oil futures on WTI were at $70.15, down by 1.06 per cent.

April crude oil futures were trading at ₹5,801 on Multi Commodity Exchange (MCX) in the initial trading hour of Thursday morning against the previous close of ₹5,839, down by 0.65 per cent, and May futures were trading at ₹5,840 against the previous close of ₹5881, down by 0.70 per cent.

‘No weakness in banking system’

On Wednesday, the US Fed Reserve announced its decision to increase the interest rates by 25 basis points. This increase was expected by the market also. However, the US Fed Reserve Chair, Jerome Powell, made it clear about the soundness of the banking system in the US. Stating that the management of the Silicon Valley Bank failed badly, he said: “These are not weaknesses that are running broadly through the banking system.”

The recent bank failures the US led to the crash in the prices of commodities such as crude oil also.

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Media reports said US Treasury Secretary Janet Yellen has informed lawmakers that she has not considered or discussed ‘blanket insurance’ for bank deposits in the US, without approval by Congress.

Meanwhile, official data from the US EIA (Energy Information Administration) on the petroleum status in the US for the week ending March 17, which was released on March 22, showed an increase in crude oil inventories. The US commercial crude oil inventories (excluding those in the strategic petroleum reserve) saw an increase of 1.1 million barrels from the previous week. At 481.2 million barrels, US crude oil inventories were about 8 per cent above the five-year average for this time of year.

US imports decline

US crude oil imports averaged 6.2 million barrels a day last week, a decrease of 45,000 barrels a day from the previous week. Over the past four weeks, crude oil imports averaged about 6.2 million barrels a day, 0.4 per cent less than the same four-week period last year.

However, Wood Mackenzie in its report titled ‘The great reopening: What the end of China’s ‘zero-Covid’ strategy means for global energy and natural resources’ said the Brent crude price will be in the range of $89.40 per barrel for 2023.

Also read: Russian crude accounted for 40% of India’s oil imports in February

It said a strong recovery in global oil demand in 2023 drives a tightening of the global supply and demand balance and pushes prices higher. A return to normal mobility in China is the single biggest demand driver, accounting for one million barrels a day of the 2.6 million barrels a day increase this year, it said.

Oil demand in Europe and the US is expected to remain resilient, despite the slow economic growth. “Barring a significant recession, we see Brent rising from current levels to average $89.40 a barrel for 2023,” the report said.

In the high-growth scenario in China, the tightening of the supply-demand balance accelerates as the recovery gathers pace, particularly through the second half of 2023. “Our analysis shows that increased construction activity results in China’s oil demand growing by 1.4 million barrels a day on the year, or about 400,000 barrels a day higher then our base case. This additional China demand in a year with very strong global growth tightens the market further,” the report said.

Turmeric up, guar gum down

March zinc futures were trading at ₹253.30 on MCX in early trade against the previous close of ₹254.45, down by 0.45 per cent.

On the National Commodities and Derivatives Exchange (NCDEX), April turmeric (farmer polished) contracts were trading at ₹6,960 in initial trading against the previous close of ₹6,928, up by 0.46 per cent.

April guar gum futures were trading at ₹11,845 on NCDEX against the previous close of ₹11,900, down by 0.46 per cent.