Crude oil futures drop 1% to Rs 3,871 per barrel on weak demand, rise in US inventory

Crude oil futures edged lower to Rs 3,871 per barrel on January 21 as participants increased their short position as seen by the open interest. The crude oil price had gained 0.5 percent yesterday on the NYMEX.

Crude oil prices extended decline after a gap down open in the afternoon session on surging coronavirus cases globally and rise in US crude stockpile.

The American Petroleum Institute (API) reported that US crude inventories rose 2.56 million barrels for the week ended January 15 as against a forecast of 1.2 million barrels decline.

The International Energy Agency (IEA) slashed forecasts for global oil demand in the first quarter by 580,000 barrels per day as countries restrict movements to contain new COVID outbreaks.

“NYMEX crude trades modestly lower near $53 per barrel amid API report that noted a 2.56 million barrels increase in US crude oil stocks as against a forecast of 1.2 mn bbl decline. Also weighing on price is rising virus cases, mixed economic data from major economies and IEA’s downbeat demand outlook. However, supporting price is US stimulus expectations and Saudi’s voluntary production cuts. Crude is yet to break past last week’s 11-month high and choppy trade is likely ahead of inventory report”, said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

West Texas Intermediate crude was down 0.84 percent to $52.86 per barrel, while Brent crude, the London-based international benchmark fell by 0.87 percent to $55.59 per barrel.

MCX iCOMDEX Crude Oil Index inched lower 45.45 points, or 1.02 percent, at 4,397.55 at 15:57.

In the futures market, crude oil for February delivery touched an intraday high of Rs 3,896 and an intraday low of Rs 3,864 per barrel on MCX. So far in the current series, black gold has touched a low of Rs 3,486 and a high of Rs 3,958.

Crude oil delivery for February dropped by Rs 39, or 1 percent, to Rs 3,871 per barrel at 15:58 hours IST with a business turnover of 1,879 lots. 

The value of February contracts traded so far is Rs 173.36 crore.

 

Crude oil prices traded under pressure after US API reported inventory build of 2.56 mb against a forecast of decline. The worries over fuel demand recovery also took a toll on oil prices which has lower oil demand outlook for 2021.

We expect crude oil prices to trade sideways to down with support at $52 and resistance at $54. MCX Crude oil February has support at Rs 3,820, resistance at Rs 3,940.