Crude oil futures traded higher on global exchanges in the early trade on Friday morning. Prices were driven by factors such as the European Union’s proposal to ban the import of Russian oil on the supply side and the impact of the weak global economic outlook on the demand side.

At 10.04 am on Friday, July Brent oil futures were at $109.51, up by 1.86 per cent; and June crude oil futures on WTI were at $108.05, up by 1.81 per cent.

May crude oil futures were trading at ₹8,344 on Multi Commodity Exchange (MCX) in the initial hour of Friday morning against the previous close of ₹8,174, up by 2.08 per cent; and June futures were trading at ₹8,236 against the previous close of ₹8,069, up by 2.07 per cent.

Tight supply

Market reports noted that if the proposal of the European Union to ban the import of crude oil from Russia materialises, it will have an impact on the supply side as the markets are already facing a tight supply situation.

Some western nations have already imposed a ban on the import of crude oil from Russia following its war with Ukraine. It may be noted here that Russia also recently sanctioned 31 companies based on a retaliatory answer to sanctions imposed by the Western nations.

The demand side factors such as the continued Covid-led lockdowns in China (a major consumer of crude oil in the world), and the impact of rising inflation and rates on the global economic growth helped in controlling the price.

Saish Sandeep Sawant Dessai, Research Associate, Base Metals, Angel One Ltd, said, prices of crude continued to inch up higher as on Thursday. Brent crude ended 1.08 per cent higher and NYMEX crude ended 0.40 per cent higher as supply concerns and geopolitical tension in Europe got the upper hand over the economic fears.

A pending European Union ban on Russian oil has been delayed as Hungary and a few other European nations oppose the ban because it would be too disruptive to European economy, as it imports 3.5 million barrels of Russian oil and oil products every day.

“Extended lockdowns across China, leading to the slide in demand growth as the nation seemingly on the brink of locking down the capital of Beijing are driving a significant slowdown in the world’s second-largest oil consumer. On the other hand, the OPEC slashed its growth forecast for world oil demand in 2022 for a second straight month, citing the impact of Russia’s invasion of Ukraine, rising inflation, and the resurgence of the Omicron coronavirus variant in China,” he said.

In his outlook for the day, he said increased geopolitical tensions between Russia and Ukraine, when the latter blocked the flow of Russian gas to Europe by shutting down a major transit route, will result in a supply shortage. May zinc futures were trading at ₹307.50 on MCX in the initial hour of Friday morning against the previous close of ₹306.30, up by 0.39 per cent.

Base metals down

Saish Sandeep Sawant Dessai said the industrial base metals ended on a negative note on Thursday amid the surge in the dollar, which moved past its all-time high levels. Copper prices slipped over 1.5 per cent as they tumbled over to 7-month lows as a slowing global economy will have little to no demand for metals.

With inflation surging and the Central banks around the globe heading towards a tighter monetary policy and growth fears also pushed down the global equity markets, hitting one-year lows, he said.

Meanwhile, the dollar reached a new 20-year high against a chunk of other major rivals, eventually making dollar-priced metals costlier for buyers with other currencies. Another hindrance to metal prices was the Covid lockdowns in China, the top metals consumer, which saw the manufacturing activity shrinking and slowing export growth and stagnant imports.

In his outlook for the day, he said, “We expect copper to trade lower towards ₹729 levels, which could prompt the price to move more down to ₹710 levels.”

Castorseed gains

On the National Commodities and Derivatives Exchange (NCDEX), May castorseed futures were trading at ₹7,328 in the initial hour of Friday morning against the previous close of ₹7,294, up by 0.47 per cent.

May steel long contracts were trading at ₹53,600 on NCDEX in the initial hour of Friday morning against the previous close of ₹54,480, down by 1.62 per cent.