International crude oil prices rebounded on Wednesday, May 15 from a two-month low level earlier in the session as the market balanced somewhat bullish US economic and storage data against a 2024 forecast for weaker global oil demand growth from the Paris-based International Energy Agency (IEA).
Brent futures rose 33 cents, or 0.4 per cent, to $82.71 a barrel, while US West Texas Intermediate (WTI) crude rose 43 cents, or 0.6 per cent, to $78.45. Brent had touched an 11-week low of $81 a barrel earlier in the session. On the domestic front, crude oil futures were last flat at ₹6,551 per barrel on the multi commodity exchange (MCX).
What pushed crude oil prices?
-The US Energy Information Administration (EIA) said energy firms pulled a more-than-expected 2.5 million barrels of crude from stockpiles during the week ended May 10. That compares with the 0.5-million barrel withdrawal analysts forecast in a Reuters poll, and the 3.1-million barrel decline shown in data from the American Petroleum Institute (API), an industry group.
-US consumer price index (CPI)-based inflation increased less than expected in April, suggesting inflation resumed its downward trend at the start of the second quarter in a boost to financial market expectations that the US Federal Reserve may cut the benchmark interest rates in September.
-The expectations were boosted by other US macro data showing retail sales were unexpectedly flat last month as inflation-weary consumers cut back spending at online retailers and auto dealerships. Lower interest rates would reduce borrowing costs for businesses and consumers and could spur economic growth and demand for oil.
-With the Fed still expected to cut interest rates later this year, the US dollar, opens new tab fell to a five-week low against a basket of other currencies. A weaker dollar can boost global demand for oil by making the fuel less expensive in other countries.
-Oil prices also gained support from news in Canada, where a large wildfire is slowly approaching the major Canadian oil sands city of Fort McMurray and around 6,000 people in four suburbs have been told to evacuate. That fire could result in a reduction in oil supplies from Canada.
-The IEA trimmed its forecast for 2024 oil demand growth, widening the gap with producer group Organization of the Petroleum Exporting Countries (OPEC) in terms of expectations for this year’s global demand outlook. IEA’s weak oil demand forecast for 2024 led to crude prices sliding to the two-month low level in today’s session.
-The OPEC and its allies like Russia (OPEC+), is likely to hold its June 1 oil policy meeting online, four OPEC+ sources said, rather than in Vienna as currently scheduled. The output policy decision is widely eyed by traders and analysts as the market is highly volatile over macro data and rate decisions.
Where are prices headed?
Crude oil futures eased on Tuesday as the latest OPEC monthly report showed that the cartel exceeded their agreed limit by pumping an additional 568,000 bpd last month. Despite this, OPEC remains optimistic about global oil demand, projecting a rise of 2.25 mbpd in 2024 and 1.85 mbpd in 2025, according to Kaynat Chainwala – Senior Manager, Commodities Research – Kotak Securities.
Oil also witnessed profit-taking following the release of hotter-than-anticipated US PPI data. April’s core PPI surpassed expectations, rising to 0.5 per cent compared to the projected 0.2 per cent, while the overall PPI also exceeded forecasts, climbing to 0.5 per cent against an expected 0.3 per cent. The spike in US PPI data raised concerns about heightened inflation, consequently driving oil prices lower.
‘’The support levels for crude oil stand at $77.70–$77.00, with resistance anticipated at $79.10–$79.90. In terms of INR, crude oil is expected to find support at ₹6,470– ₹6,390, while resistance may be encountered at ₹6,610– ₹6,700,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
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