Oil reports longest weekly losing streak since 2018; Brent posts first gain in 6 sessions, settles 2% higher at $75/bbl

Brent crude futures settled at $75.84 a barrel, up$1.79, or 2.4 per cent, while US West Texas Intermediate (WTI) crude futures settled at $71.23, up $1.89, or 2.7 per cent. For the week, both benchmarks lost 3.8 per cent, after hitting their lowest since late June on Thursday, a sign that many traders believe the market is oversupplied, according to news agency Reuters.

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Even though oil reported its longest weekly losing streak since 2018, Brent and US WTI posted their first gain in six sessions on Friday, which analysts said could be a sign that the market has found a floor for now after falling for six straight sessions.

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a December 18 expiry, settled higher by 2.48 per cent at ₹5,946 per bbl, having swung between ₹5,840 and ₹5,984 per bbl during the session, against a previous close of ₹5,802 per barrel.

What’s behind the movement of oil prices?

-Fuelling the market’s downturn, Chinese customs data showed its crude oil imports in November fell 9 per cent from a year earlier as high inventory levels, weak economic indicators and slowing orders from independent refiners weakened demand.

-US Labor Department data released showed stronger-than-expected job growth, signs of underlying labor market strength that should support fuel demand in the biggest oil market, said Reuters.

-Nonfarm payrolls increased 199,000 last month following a 150,000 advance in October, a Bureau of Labor Statistics report showed Friday. Offering more support to the demand enthusiasm, data showed US consumer sentiment perked up much more than expected in December.

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-This followed government data on Wednesday showing US gasoline demand last week lagged the 10-year seasonal average by 2.5 per cent and gasoline stocks rose by 5.4 million barrels, more than quintuple forecasts, leading to gasoline prices to decline.

-The Organization of the Petroleum Exporting Countries and its allies (OPEC+) recently agreed to a combined 2.2 million barrels per day (bpd) in output cuts for the first quarter of next year. The market has been concerned, however, that some members may not adhere to their commitments.

-Saudi Arabia and Russia, the world’s two biggest oil exporters, on Thursday called for all OPEC members to join an agreement on output cuts ‘’for the good of the global economy”. Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman met to discuss further oil price cooperation on Wednesday.

Where are prices headed?

Crude oil exhibited considerable volatility, extending its decline on Thursday. The drop to fresh six-month lows was fuelled by heightened US outputs and concerns over Chinese demand. The US crude oil production reached a record high of 13 million barrels per day, according to the US Energy Information Administration report released on Wednesday. 

The potential economic challenges in China pose a threat to crude oil demand. However, a correction in the dollar index, following gains in the Japanese Yen, provided some support to oil prices at lower levels. 

‘’Anticipating ongoing volatility, we expect crude oil prices to remain unpredictable. Crude oil finds support in the range of $69.35–68.80, with resistance levels at $71.10-71.70 for the current sessions. In INR, crude oil has support at ₹5,740-5,660 and faces resistance at ₹6,850-5,930,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

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Published: 09 Dec 2023, 09:59 PM IST