By Bhavik Patel
Oil prices have now lost around 20% since their highest level for 2023 of above $90 per barrel. Concerns about economies and oil demand amid rising interest rates have pushed oil prices down to a 10% decline this year, the first annual drop since 2020.
Despite the OPEC+ production cuts and a new war breaking out in the Middle East. In last 15 days, crude oil got shot in the arm after it was facing weak demand from Asia and Europe. Prices were sliding down but Red Sea attack gave bulls something to cheer about and we saw prices jumping from 5680 to 6340 in manner of 9 trading sessions.
So far this year, the DoE has bought less than 20 million barrels of oil to refill the strategic petroleum reserve. DoE have to fill out more than 180 million barrels of oil by 2024 so this will give cushion to prices whenever we will see any sharp correction as DoE is looking to buy oil whenever Brent goes in vicinity of $68-$72.
The total number of active drilling rigs in the United States rose this week by 2, according to new data that Baker Hughes published on Friday. The total rig count rose to 622 this week. Since this time last year, Baker Hughes has estimated a loss of 157 active drilling rigs. This is why we have seen uptick in US Shale production which is negative for crude oil.
In MCX, we expect prices to drift downwards around 5850-5800 before stabilizing. Next week we might see volume picking up after holiday season and immediate trigger would be if there is any fresh attack in Red Sea or normalization.
If there aren’t any fresh attack then we may see prices drifting lower as traditionally last quarter has always been slow in terms of crude oil demand and that is what is reflected in oil prices. 2024 being election year for many of the countries so majority of the economies will be looking to keep prices under check.
(Bhavik Patel is a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)
