Crude oil futures traded higher on Tuesday morning following the proposed production cuts by Saudi Arabia and Russia, and the decision of the US government to buy crude oil for its strategic petroleum reserves.

At 9.50 am on Tuesday, September Brent oil futures were at $78.14, up by 0.58 per cent; and August crude oil futures on WTI (West Texas Intermediate) were at $73.47, up by 0.66 per cent.

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July crude oil futures were trading at ₹6,054 on Multi Commodity Exchange (MCX) in early trade against the previous close of ₹6,024, up by 0.50 per cent; and August futures were trading at ₹6,076 as against the previous close of ₹6,048, up by 0.46 per cent.

Further tightness

The crude oil output from two major producers – Saudi Arabia and Russia – is expected to come down in August. Saudi Arabia will extend bring down crude oil output by 1 million barrels a day to August also. Russia has also announced its decision to reduce exports in August. These factors may lead to further tightness in the market.

Last week’s announcement by the US government to refill its strategic petroleum reserve has also supported the crude oil market. On July 7, the US Department of Energy said that it will be looking to purchase 6 million barrels of crude oil for delivery in October and November.

An article by ING Think said the US Department of Energy has successfully tendered for 6.3 million barrels until now, and this volume is set to be delivered in August and September.

There had been reports that the Department of Energy was looking to buy roughly 12 million barrels this year. “If we see the total volume awarded in the latest announcement, that would get us to this 12 million barrels already,” it said.

Zinc, turmeric up

July zinc futures were trading at ₹215.55 on MCX in the initial trading hour of Tuesday morning against the previous close of ₹214.50, up by 0.49 per cent.

On the National Commodities and Derivatives Exchange (NCDEX), August turmeric (farmer polished) contracts were trading at ₹10,750 in initial trade against the previous close of ₹10,326, up by 4.11 per cent.

July guar gum futures were trading at ₹10,890 on NCDEX against the previous close of ₹10689, up by 1.88 per cent.

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