Crude oil yesterday settled 2.18% higher at Rs 5342, bolstered by renewed supply concerns following the suspension of oil exports from the Black Sea port of Novorossiysk, which was triggered by a Ukrainian drone strike that inflicted damage on an oil depot, a vessel, and adjacent infrastructure. The assault, resulting in injuries to crew members and causing disruptions at a critical Russian export facility, has intensified concerns regarding potential supply constraints within an already precarious geopolitical landscape. Gains were moderated by U.S. inventory data, with the EIA reporting a substantial 6.4-million-barrel increase in crude stocks, significantly surpassing the anticipated 2-million-barrel build, underscoring short-term demand weakness.

Gasoline and distillate inventories experienced a modest decline, suggesting a nuanced outlook for refined fuel consumption. The EIA’s Short-Term Energy Outlook has projected that U.S. oil production will average 13.59 million bpd this year, marking a new record, with only a modest decline anticipated for the following year, influenced by stronger-than-expected output in August.

Global oil and liquid fuels production is projected to reach 106 million bpd, with demand anticipated at 104.1 million bpd, thereby solidifying expectations of a market characterized by surplus supply. The IEA has revised its supply growth forecast upward, indicating more significant surpluses extending into 2026. Global output is projected to increase by 3.1 million bpd in 2025 and by 2.5 million bpd in 2026, with supply consistently exceeding demand by significant margins.

Crude oil is currently experiencing short covering, evidenced by a significant decline in open interest of 32.65%, coinciding with a price increase of Rs 114. Support is positioned at Rs 5284, with a possible downturn towards Rs 5227 if this level is violated. Resistance is established at Rs 5379, and a breakout above this level could propel prices toward Rs 5417.