By Jigar Trivedi
WTI crude futures eased after touching a three-month high of $123.18 per bbl, recording the seventh weekly advance, on prospects of demand recovery from China and the US summer driving season. Robust demand for refined products underpins oil demand. US retail gasoline prices have repeatedly broken records and recently hit $5 a gallon as Americas ramped up travel despite high prices. Supply remains tight, with OPEC and its allies unable to deliver according to their quotas amid a lack of spare capacity among producers, sanctions on Russia, and output in Libya roughly halved by political unrest.
Crude oil futures outlook
Though the oil market remains tight, we could see some pressure for the week amid a slew of central bank meetings, including FOMC meetings. The latest US inflation print for May showed that prices have surged to a new 40-year high of 8.6%, adding more pressure on the Fed to act more aggressively, pushing the economy into a recession. The Fed is expected to hike rates by 50 bps points until September and the possibility of 75 bps is rising, aiding the dollar index.
A higher dollar hurts all commodities denominated in dollars, as it makes the commodity dearer for other currency holders. Meanwhile, renewed restrictions in China, just weeks after major easing in key cities such as Shanghai might also weigh down on sentiments. We expect MCX Crude oil June futures to decline towards Rs 9,000 per bbl for the week.
(Jigar Trivedi, Manager — Non-Agro Fundamental Research, Anand Rathi Shares & Stock Brokers. Views expressed are the author’s own.)
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