WTI oil futures pared early losses and closed above $85 per bbl in the previous week, as weakness in dollar index and expectation of higher demand from China supported sentiments. Oil rose on speculation that Beijing was considering cutting the quarantine period for visitors to seven days from 10 days. China, the world’s largest crude importer, has stuck to strict COVID-19 curbs this year, weighing heavily on business and economic activity and reducing demand for fuel.

Meanwhile, there were also reports that the Biden administration is willing to replenish the strategic petroleum reserves in the $ 67 – $72 per bbl range, putting a floor for prices.

Money managers have decreased their bullish Nymex WTI crude oil bets by 32,616 net-long positions to 176,050, weekly CFTC data on futures and options showed. The net-long position was the least bullish in three weeks.

Outlook for the week

Oil might be under pressure for the week as fears of a global economic slowdown might take grip ahead of two major central bank meetings. The ECB meeting is due this week and the FOMC meeting is due next week, while, the central banks are expected to hike rates by 75 bps and sound hawkish. Recent Manufacturing PMI data from the US, UK and Eurozone was also disappointing, showing contractions in October.

Meanwhile, China’s September crude imports of 9.79 million barrels per day were 2% below a year earlier, customs data showed on Monday, as the independent refiner’s curbed throughput amid thin margins and lackluster demand. China’s fuel demand took a hard hit as Beijing’s drastic COVID-19 curbs stifled travel and manufacturing activities.

Having said that, the downside might be limited, as OPEC+ is set to cut output by 2 million barrels a day from November, while the European Union ban on Russian crude will take effect in December. US SPR releases are also coming to an end by early November. We expect MCX Crude oil November futures to decline towards Rs. 6,650 per bbl for the week.