Crude oil futures traded higher on Wednesday morning due to fears of supply disruptions from tropical storm Francine in the Gulf of Mexico.
At 9.57 am on Wednesday, November Brent oil futures were at $69.60, up by 0.59 per cent, and October crude oil futures on WTI (West Texas Intermediate) were at $66.08, up by 0.50 per cent.
September crude oil futures were trading at ₹5564 on Multi Commodity Exchange (MCX) during the initial hour of trading on Wednesday against the previous close of ₹5533, up by 0.56 per cent, and October futures were trading at ₹5548 against the previous close of ₹5513, up by 0.63 per cent.
Crude oil prices, which touched the lowest since December 2021 on Tuesday, rebounded on Wednesday morning over apprehensions over supply disruptions from tropical storm in Gulf of Mexico.
Reports said tropical storm Francine has strengthened into a Category 1 hurricane in the western Gulf of Mexico. It is likely to intensify further before making landfall in Louisiana. This landfall is likely to pose a threat to refinery operations in the region.
In its Monthly Oil Market Report for September, OPEC (Organization of the Petroleum Exporting Countries) said the world oil demand growth forecast for 2024 is revised down slightly to about 2 million barrels a day, which is still well above the historical average of 1.4 million barrels a day seen prior to the Covid pandemic.
This minor adjustment of 80,000 barrels a day reflects mainly actual data received year-to-date. The forecast for world oil demand growth in 2025 is also slightly revised down by 40,000 barrels a day to stand at 1.7 million barrels a day.
Referring to OPEC monthly report, ING Think’s Warren Patterson, Head of Commodities Strategy, and Ewa Manthey, Commodities Strategist, said in their Commodities Feed that while the group made some marginal downward revisions to its demand forecasts, these remain well above the rest of the market.
OPEC still forecasts global demand to grow by more than 2 million barrel a day this year and by 1.74 million barrel a day in 2025. These are some distance from the roughly 1 million barrel a day demand growth that the IEA (International Energy Agency) expects for this year and next.
OPEC numbers also show that group output fell by 197,000 barrels a day month-on-month to 26.59 million barrel a day in August. The decline was largely driven by Libya, where stoppages saw production fall 219,000 barrels a day month-on-month.
Stating that oil prices continued to weaken on Tuesday, they said ICE Brent fell 3.69 per cent, settling at just over $69 a barrel. This is the first time Brent has closed below $70 a barrel since late 2021.
They said the continued weakness in the oil market will be alarming to OPEC+. To soothe the market, the group needs to announce policy to tackle the expected surplus in 2025.
“However, the more weakness we see in the market, the greater the risk that OPEC+ scraps its output cuts in an attempt to push out other non-OPEC producers from the market.
Following this option would mean a lot more downside to prices. Even if the group sticks to cuts, compliance is likely to slip. Lower prices mean lower revenues for OPEC members and so as prices weaken there will be growing pressure to pump more in an attempt to try maintain revenues,” they said.
September natural gas futures were trading at ₹187.90 on MCX during the initial hour of trading on Wednesday against the previous close of ₹188.70, down by 0.42 per cent.
On the National Commodities and Derivatives Exchange (NCDEX), September jeera contracts were trading at ₹25590 in the initial hour of trading on Wednesday against the previous close of ₹25355, up by 0.93 per cent.
October turmeric (farmer polished) futures were trading at ₹14044 on NCDEX in the initial hour of trading on Wednesday against the previous close of ₹14168, down by 0.88 per cent.