Crude oil yesterday settled lower by 1.68% at Rs 5,145 as investors responded to apprehensions regarding a possible supply surplus and the resurgence of trade tensions between the U.S. and China. The International Energy Agency projected that the global oil market may encounter a surplus of as much as 4 million barrels per day by 2026, a figure notably elevated from previous estimates, driven by increasing production from OPEC+ and tepid demand growth.

The current trade dispute between the U.S. and China, characterized by the imposition of new port fees on cargoes by both countries, has heightened concerns regarding potential disruptions in freight flows and a subsequent decline in economic activity, which could adversely affect oil demand forecasts. The U.S. Energy Information Administration has projected record-high domestic oil production at 13.53 million barrels per day this year, an increase from 13.23 million bpd in 2024, indicating a robust supply outlook moving forward. EIA data indicated that U.S. crude inventories increased by 1.8 million barrels last week, reaching 416.5 million barrels, surpassing expectations.

Additionally, gasoline and distillate stocks also saw an uptick, contributing to upward pressure on prices. Refinery utilization decreased to 91.4%, while crude stocks at Cushing, Oklahoma, experienced a modest decline of 271,000 barrels. In September, OPEC+ increased production by 630,000 barrels per day, reaching a total of 43.05 million bpd. This move reflects a sustained optimistic outlook on demand, while also recognizing a diminishing supply deficit.

The market is currently experiencing renewed selling pressure, as evidenced by a 10.32% increase in open interest, reaching 10,006 contracts. Crude oil demonstrates support levels at Rs 5,100 and Rs 5,056, while encountering resistance at Rs 5,216. A breakout above this resistance could lead to a test of Rs 5,288.