By Jigar Trivedi
WTI crude futures rallied towards $119/bbl, recording the sixth weekly advance. Prices have been marching higher in the previous week as the EU succeeded in banning Russian oil, Chinese lockdowns were lifted and the US summer driving season got underway. Meanwhile, OPEC+ agreed to production hikes of 648,000 barrels a day for July and August, without exempting Russia from the supply pact, pushing the prices higher. Robust inventory data aided the sentiments after US crude inventories fell 5.1 million barrels in the week ended 27th May, while gasoline supplies dropped 700,000 barrels and distillate stocks declined by 500,000 barrels. CFTC data showed that money managers have increased their bullish Brent and WTI oil bets by 21,608 combined net-long positions to 492,271, the most bullish in almost three months.
Russian output might fall in the coming days after the EU approved a phased ban on Russian oil in the next six months, at a time when US Summer driving season coupled with reopening from China adds to market tightness, a perfect cocktail for the bullish view. In the latest developments, Saudi Arabia boosted its official selling prices for Asian customers in July as China, the world’s top crude importer, cautiously emerged from virus lockdowns that have strained its economy.
Saudi Aramco raised its key Arab Light crude grade for Asian customers by $2.10 a barrel from June to $6.50 above the benchmark it uses. We expect MCX Crude oil June futures to rise towards Rs. 9,500 per bbl for the week.
(Jigar Trivedi, Manager — Non-Agro Fundamental Research, Anand Rathi Shares & Stock Brokers. Views expressed are the author’s own.)