Price volatility will remain high till the outcome of the event and hence, irrespective of the outcome, the consumption of oil will continue. Rest of the factors like slowdown in China and strengthening dollar might create impact on the prices in turn create high volatile moves in the counter, Prathamesh Mallya, Deputy Vice President, Research – Non-Agro Commodities & Currency at Angel One says.
The US debt ceiling crisis has kept crude oil prices on the edge. Do you see benchmarks Brent and WTI trading in the range until June 1 – the deadline for the US to pay its debts?
The US Debt ceiling is one of the many events keeping oil prices on the edge apart from other host of factors ranging from slow demand from China, strength in the dollar index. Hence, for next one week, the risk premium in oil will be purely focused on the outcome of the US Debt ceiling.Historically, the US Debt ceiling gets approved at the last minute as the US Government cannot afford to default on its own debt as it is one of the secured markets that investors foresee and project. Hence, even this time, it will be a last-minute hustle and the US debt ceiling might get approved as history repeats in rhythms and rhymes.
What levels do you see for Brent and WTI during this period?
For MCX, Rs 5,600 on the lower side and Rs 6,400/bbl
For WTI crude $68/bbl on the lower side and $76/bbl on the higher side.
For Brent, $70/bbl on the lower side and $78/bbl on the higher side.
The US crisis could hit the consumption pattern, as well, in the largest economy. What impact do you see if the US fails to honour its debt by June 1?
Debt ceiling is a temporary phenomenon that affects the financial markets and not directly affects the consumption pattern of oil.
Price volatility will remain high till the outcome of the event and hence, irrespective of the outcome, the consumption of oil will continue. Rest of the factors like slowdown in China and strengthening dollar might create impact on the prices in turn create high volatile moves in the counter.
While Chinese consumption of oil has picked up, is it good enough to hold the prices of oil?
Although Chinese consumption of oil has picked up, oil prices really require a boost from other consumers as well as stronger growth in other parts of the globe. While the US economy is doing well in terms of economic indicators backed by data sets, it remains to be seen how the growth continues in the second half of 2023.
Alternatively, oil prices will trade in the range as answered in the previous question.
Russian Ural prices have firmed up on demand from India, China. How good or bad is it for the global oil sector?
The real reason why oil prices have been firming-up is because of the oil imports from Russia. If India does not consume from Russia, the risk premium increases on account of shortages in the supply chain. Hence, India consuming oil from Russia is a good thing for the global economy and for the oil sector in totality.
What should traders of MCX oil futures do?
The range play for oil on the MCX will be Rs 5,600 on the lower side, which can be points of accumulation and Rs 6,400 on the higher side around which will be exit points. CMP of MCX oil as on 22nd May stands at Rs 5,978/bbl.
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