Crude oil prices increased by 0.35% to Rs 5,391 as traders evaluated the prospects of a U.S.–China trade truce following President Donald Trump’s decision to reduce tariffs on China, providing a slight boost to market sentiment. Nonetheless, optimism was tempered by ongoing worries regarding weak demand and increasing global supply, bolstering expectations of an oil surplus that is likely to persist through 2026.

The OPEC+ alliance has announced intentions to increase output by 137,000 barrels per day in December, aligning with the uptick in production from U.S. and North Sea operators. Concurrently, tanker oil volumes at sea have surged to a historic 1.4 billion barrels, indicating ample inventories. The IEA has adjusted its global supply growth forecast for 2025 upwards in light of OPEC+ output increases, while simultaneously reducing demand expectations due to a decline in economic momentum. The agency anticipates that oil consumption will increase by merely 700,000 barrels per day each year until 2026.

In the latest report, U.S. crude inventories experienced a significant decline of 6.858 million barrels, surpassing forecasts considerably. Conversely, stocks at Cushing increased by 1.334 million barrels. Gasoline and distillate inventories experienced a decline of 5.941 million and 3.362 million barrels, respectively, indicative of robust refining activity. OPEC has upheld its projections for demand growth in 2025 and 2026, while also acknowledging the potential risk of a supply surplus as production increases.

Crude oil is currently experiencing short covering, as evidenced by a 0.01% decline in open interest, which stands at 14,294 lots. Support is positioned at Rs 5,335, beneath which prices could potentially test Rs 5,279. Conversely, resistance stands at Rs 5,423, and a breakout may propel prices towards Rs 5,455.