By Jigar Trivedi
WTI Crude oil futures saw the first weekly decline in eight, culminating in a loss of almost 9%, pressured by the recent wave of aggressive rate hikes around the world and mounting recession woes. Increasing production from the US also roiled markets. US crude oil production rose to 12 million barrels per day for the first time since May 2020, while oil rig counts, being an early indicator of the future output, rose to 584 for the week ended 17th June. However, tight supplies capped the losses as Libyan output was almost completely halted amid political unrest.
Meanwhile, US crude oil inventories rose by 1.956 million barrels in the week ended 10th June, while crude stocks at Cushing, Oklahoma, fell by 0.826 million barrels. A build-up in inventory data can be mainly attributed to record high weekly SPR releases from the US, which totaled 7.7 million barrels for the week. Money managers have decreased their bullish Nymex WTI crude oil bets by 18,895 net-long positions to 265,984, the least bullish in five weeks, according to weekly CFTC data.
Crude oil outlook
Sentiments have received a boost as traders weighed the odds of a recession in the US amid Federal Reserve tightening, with President Joe Biden pushing back against the notion that the world’s largest economy faces a contraction. Right now, investors are assessing the tension between supply concerns and uncertainty over global economic recovery in the face of surging inflation and rising interest rates.
Russian oil output likely rose in May and Libya’s oil output rose to 700K- 800K b/d, after a complete halt earlier in the month. OPEC+ meeting due on 30th June might be the major focus after the cartel hiked production by 50% in the earlier meeting. The cartel might hike output by 648,000 barrels a day for August, bringing back to the market 9.7m barrels a day of oil that was drawn at the peak of the pandemic in 2020. We expect MCX Crude oil June futures to decline towards Rs 8,350 per bbl for the week.
(Jigar Trivedi, Manager — Non-Agro Fundamental Research, Anand Rathi Shares & Stock Brokers. Views expressed are the author’s own.)