Crude oil traded lower on Tuesday morning as China cut lending rates by 10 basis points at a time when the market was expecting more.
At 9.54 am on Tuesday, August Brent oil futures were at $75.92, down by 0.22 per cent, and August crude oil futures on WTI were at $71.14, down by 0.52 per cent.
July crude oil futures were trading at ₹5862 on Multi Commodity Exchange (MCX) during initial trading against the previous close of ₹5,865, down by 0.05 per cent, and August futures were trading at ₹5886 as against the previous close of ₹5,892, down by 0.10 per cent.
On Tuesday, China reduced the one-year and five-year loan prime rates (LPR) by 10 basis points in its efforts to give a boost to the economy.
Wished for more
The People’s Bank of China reduced the one-year LPR from 3.65 per cent to 3.55 per cent, and the five-year LPR from 4.30 per cent to 4.20 per cent on Tuesday. Some reports noted that market was expecting the five-year LPR to come down even more.
The recent economic indicators from China had shown a slowdown in its post-Covid economic recovery. Following this, some of the major global banks had also reduced the GDP forecasts for the country.
The reduction in LPR is an effort by China to boost its economic recovery. China is a major consumer of crude oil in the global market. A delay in the economic recovery in that country will impact the crude oil demand affecting the price of the commodity.
ECB favours inflation control
Market is also focusing on decisions related to interest rate hikes by different Central banks. On Monday, two from the European Central Bank (ECB) favoured an increase in the interest rates to control inflation.
Quoting Isabel Schnabel, ECB board member, a Reuters report said: “We need to remain highly data-dependent and err on the side of doing too much rather than too little.” Citing the blog post of the Slovak central bank governor, Peter Kazimir, the report said: “A continuation of monetary policy tightening is the only reasonable way ahead.” Hike in interest rates impact the demand for commodities such as crude oil.
Castorseed, turmeric lose lustre
June zinc futures were trading at ₹218 on MCX against the previous close of ₹219.25, down by 0.57 per cent.
On the National Commodities and Derivatives Exchange (NCDEX), July castorseed contracts were trading at ₹5,840 against the previous close of ₹5889, down by 0.83 per cent.
June turmeric (farmer polished) futures were trading at ₹8,900 on NCDEX against the previous close of ₹8,986, down by 0.96 per cent.