Crude oil price forecast: MCX Crude June futures to hit Rs 8,900/bbl this week; China prepares to end lockdown

By Jigar Trivedi

The black gold marked its fourth weekly gain in a row, with WTI Crude oil July futures rising above $110 per barrel in the previous week, as the products market remained tight amid strong demand, trumping concerns about an economic slowdown that have roiled financial markets. Rising demand for motor fuels and shrinking inventories ahead of the summer driving season underscored a fundamentally tight supply situation even as broader economic fears shook equity markets. However, upside was capped amid reports that the US will allow European companies still operating in Venezuela to divert more oil to the continent immediately. 

US crude oil inventories unexpectedly fell by 3.394 million barrels in the week ended 13th May, after an 8.487-million-barrel addition in the previous week and crude stocks at Cushing, Oklahoma, delivery hub fell by 2.403 million barrels. Meanwhile, weekly CFTC data on futures and options showed that money managers have increased their bullish Nymex WTI crude oil bets by 35,878 net-long positions to 284,830. The net-long position was the most bullish in more than three months.

Crude oil outlook

Rising fuel demand ahead of the peak summer driving season is draining gasoline stockpiles in the US, and refiners are already running near maximum capacity. Gasoline demand rose last week despite record pump prices and EIA is forecasting US gasoline consumption to rise by 1% for the period from April to September. With China edging towards the end of a two-month lockdown, which has already taken a tremendous toll on the economy, oil imports are expected to rise further. 

The stimulus package and rate cuts might prop up demand from the second-largest crude oil consumer. Meanwhile, weakness in the dollar index also aids the sentiments, as a weaker dollar makes crude cheaper for other currency holders. What is keeping a lid on prices is the European Union’s inability to clinch a deal to ban Russian oil imports as proposed earlier, amid dissent from Hungary. We expect MCX Crude oil June futures to rise towards Rs.8,900 per bbl this week.

(Jigar Trivedi, Manager — Non-Agro Fundamental Research, Anand Rathi Shares & Stock Brokers. Views expressed are the author’s own.)

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