Crude oil weekly outlook: MCX Crude June futures likely to hit Rs 9,050 per bbl, gains for 3rd straight week

By Jigar Trivedi

Crude oil continued the gain for the third week in a row, as traders tracked developments around a proposed EU ban on Russian oil, a move that would tighten global supply further. However, demand concerns from China were keeping a lid on prices. Chinese lockdowns were dragged on for more than a month now, directly curbing crude demand by more than 1.2 million barrels per day. The latest data pointed to lower demand from the world’s second-largest economy as China processed 11% less crude oil in April than a year ago due to Covid lockdowns. Meantime, in its monthly report, OPEC said it expects global demand to slow to 1.9 million barrels per day in Q2.

EIA Weekly inventory data also aided the prices which showed that production in the country fell to 11.8 million barrels per day for the week ended 6th May, from 11.9 million barrels per day in the previous week.

Crude oil outlook

We believe the robust demand for refined products like gasoline and distillate might continue to underpin the oil prices, amid tight supplies. With just a couple of weeks to go before the start of the US summer driving season, gasoline has surged to a record on rising demand coupled with restrained refining capacity. WTI crude oil has also been rising at a faster pace than Brent in recent sessions, for the same reason. Meanwhile, if we are looking at China, Shanghai reported no new Covid-19 infections in the broader community for a third consecutive day, hitting a crucial milestone that authorities have said will allow them to start unwinding the punishing lockdown that has gripped the Chinese financial hub for more than six weeks.

The reopening comes at a time when the market is already tight on refined products, further fuelling demand. On the supply side, EU foreign ministers failed to pressure Hungary to lift its veto of a proposed oil embargo on Russia, while, Germany plans to stop importing Russian oil by the end of the year even if the European Union fails to agree on an EU-wide ban in its next set of sanctions, government officials said. We expect MCX Crude oil June futures to rise towards Rs.9,050 per barrel for the week.

(Jigar Trivedi, Manager — Non-Agro Fundamental Research, Anand Rathi Shares & Stock Brokers. Views expressed are the author’s own.)