Demand concerns outweighed bullish EIA print
WTI Crude oil futures ended the previous week at $86.87 per bbl, down by 6.7%, amid prospects of a global economic slowdown and demand sapping lockdowns from the world’s second largest consumer China. Oil fell by more than 20% in last three months, erasing all of the gains since Russia’s late invasion of Ukraine. China continue to abide by the zero covid policy and China’s biggest cities from Shenzhen to Dalian are imposing lockdowns to curb COVID-19 outbreaks at a time when the world’s second-biggest economy is already experiencing weak growth. EIA inventory data showed that US crude oil inventories fell for the third week in a row, by 3.326 million barrels in the week ended 26th August, but failed to boost oil prices. Meanwhile, investors also shrugged off an announcement by G-7 leaders of plans to cap the price of Russian crude in retaliation for Vladimir Putin’s aggression in Ukraine. On the supply side, market is closely monitoring progress around efforts in reviving the 2015 nuclear accord, as a potential deal could unlock substantial flows from Iran, with more than 1 mbpd of oil flowing into the global markets. Money managers have decreased their bullish Nymex WTI crude oil bets by 10,719 net-long positions to 172,712, weekly CFTC data on futures and options showed.
OPEC+ Meeting in focus
The major event for the week will be the OPEC+ meeting due later today. Even though the cartel is widely expected to maintain or slightly cut output by 100,000 bpd for October, the group’s readiness to curb output in the near future could be signalled. However, extension of lockdowns in China, looming recession in Eurozone and a strong dollar index hovering near 20 year highs might cap any major gains. European central bank’s meeting on 8th September can also be watched as they are expected to hike rates by 75 bps and any acknowledgement of recession in coming quarters might pressurize oil prices. Presently, the only tailwind is a prospective output cut by OPEC+ and in the absence of which, we might see a correction in oil prices. We expect MCX Crude oil September futures to trade in the range of Rs.6,800 – 7,350 per bbl for the coming week, with a downward bias.