By Jigar Trivedi
Crude oil continued to gain for the third week in a row as traders tracked developments in the run-up to the proposed EU embargo on Russian oil, a move that would further tighten global supplies. However, Chinese demand concerns kept prices in check. Chinese lockdowns have now dragged on for more than a month, directly reducing crude demand by more than 1.2 million barrels per day. The latest data points to lower demand from the world’s second-largest economy as China processed 11% less crude oil in April than a year earlier due to the Kovid lockdown. Meanwhile, in its monthly report, OPEC said it expects global demand for the second queue to drop to 1.9 million barrels per day.
The EIA weekly inventory data also helped keep prices up, showing that production in the country fell to 11.8 million barrels per day in the week ended May 6, from 11.9 million barrels per day in the previous week.
The aspect of crude oil
We believe that strong demand for refined products, such as gasoline and distilleries, could lower oil prices, given the tight supply. With just a few weeks to go before the start of the U.S. summer driving season, gasoline has risen to a record growing demand, including moderate refining capacity. For the same reason WTI crude oil has been growing faster than Brent in recent sessions. Meanwhile, if we look at China, Shanghai did not report any new Covid-19 infections in the wider community for the third day in a row, hitting a significant milestone that authorities said would allow them to release the punitive lockdown that engulfed Chinese finances. Hub for more than six weeks.
The reopening comes at a time when the market is tightening on already refined products, further increasing demand. In terms of supplies, EU foreign ministers failed to pressure Hungary to lift its proposed oil embargo on Russia, while Germany plans to cut off Russian oil imports by the end of the year, despite the European Union’s failure to agree to an EU. – Extensive bans in the next set of bans, government officials said. We expect MCX crude to rise to Rs.9,050 per barrel for the June Future Week.
(Jigar Trivedi, Manager – Non-Agro Fundamental Research, Ananda Rathi Shares and Stock Brokers. Opinions are the author’s own.)