Oil prices dipped for a second straight day on Tuesday, April 9, dragged by talks for a ceasefire in Gaza, however losses were limited to less than a dollar a barrel as Egyptian and Qatari mediators met resistance in their search to find a way out of the war. The discussion being held in Cairo, was also attended by the director of the US Central Intelligence Agency William Burns, have so far failed to reach a breakthrough towards pausing the raging war in Gaza.
Brent crude futures last edged down 67 cents, or 0.7 per cent, to $89.7 per barrel, while US West Texas Intermediate (WTI) crude futures were down 91 cents or one per cent at $85.53, according to news agency Reuters. Coming to domestic prices, crude oil futures last traded 1.24 per cent lower at ₹7,090 per barrel on the multi commodity exchange (MCX).
On Monday, Brent posted its first decline in five sessions and the WTI its first in seven as the fresh round of Israel-Hamas ceasefire discussions in Cairo raised hopes of a breakthrough. Oil prices usually rise over geopolitical conflicts.
What’s dragging crude oil prices?
-The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, known as OPEC+, last week kept its oil supply policy unchanged and pressed some countries to increase compliance with output cuts.
-”Apart from geopolitical tensions in the Middle East, the global supply is challenged due to OPEC cuts and supply disruptions in various parts of the world, including Libya and Venezuela,” said Amit Goel, Co-Founder & Chief Global Strategist, Pace 360
-”Some countries are restricting the supply of crude, as they intend to refine it domestically, for example, Mexico. Additionally, some OPEC countries are limiting output because they exceeded their production quotas in the last few months. This includes Iraq, Nigeria, and the UAE,” added Goel.
-Hamas said an Israeli proposal on a ceasefire met none of the demands of Palestinian militant factions, but it would study the offer further and deliver its response to mediators. Gaza residents said Israeli forces kept up airstrikes on Deir Al-Balah in central Gaza and Rafah on the enclave’s southern edge on.
-Israeli Prime Minister Benjamin Netanyahu has repeatedly flagged plans for a ground assault on Rafah, where over one million displaced civilians are currently holed up, despite international pleas for restraint.
-Analysts have warned that without an end to the conflict, there is an elevated risk that other countries, particularly Iran, could be drawn into the war. Turkey claimed that it would restrict exports of some products, including jet fuel to Israel until there is a ceasefire. Israel said it would respond with its own curbs.
–Adding to concerns of a tight market, Mexico’s state oil company Pemex said it would reduce crude exports by 330,000 barrels per day (bpd) in May so it can supply more to domestic refineries, cutting by a third the supply available to the company’s US, European and Asian buyers. Pemex had already cut its April exports by 436,000 bpd.
-Russia has asked Kazakhstan to stand ready to supply it with 100,000 tons of gasoline in case of shortages exacerbated by the Ukrainian drone attacks and outages. Investors are also awaiting inflation data due from the US and China for further signals on the economic direction of the world’s top two oil consumers, and the interest rate decision from the European Central Bank on Thursday.
Where are prices headed?
Chief executive officer (CEO) Russell Hardy of commodities trading company Vitol, told a conference in Switzerland that he expected oil prices to trade in a range on $80-100 a barrel and oil demand growth of 1.9 million bpd in 2024.
Analysts said that crude oil experienced profit-taking amidst a stable dollar index and an increase in US bond yields. However, concerns regarding potential retaliation from Iran against Israel are bolstering oil prices.
‘’We do not anticipate any significant downside in crude oil shortly. However, we do not foresee Brent crude reaching $100 levels, as we anticipate that OPEC may expand output by 0.5 million barrels per day if the crude oil market continues to be in deficit. Hence, our base case is for crude to trade in a range from $85 to $95 levels in the near future,” said Amit Goel of Pace 360.
With demand holding up and growing in CY24, the crude oil market faces a deficit of almost one million bpd, highlighted commodity analysts.
‘’Support levels for crude oil are projected at $85.25–84.40, with resistance expected in the range of $86.80-87.50. In terms of INR, crude oil is anticipated to find support at ₹7,100-6,980, while resistance levels are predicted at ₹7,270-7,350,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd
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