Crude oil futures traded marginally lower on Wednesday morning as the industry report showed increase in inventories in the US.
At 9.55 am on Wednesday, August Brent oil futures were at $77.50, down 0.03 per cent, and July crude oil futures on WTI (West Texas Intermediate) were at $73.22, down 0.04 per cent.
June crude oil futures were trading at ₹6127 on Multi Commodity Exchange (MCX) during initial trading on Wednesday morning against the previous close of ₹6,167, down by 0.65 per cent, and July futures were trading at ₹6,132 against the previous close of ₹6,176, down by 0.71 per cent.
Weak market sentiment
According to the industry body American Petroleum Institute (API), crude oil inventories increased by 4.05 million barrels for the week ending May 31. API report was forecasting a decline of 1.9 million barrels in the crude oil inventories during the period.
Warren Patterson, Head of Commodities Strategy, and Ewa Manthey, Commodities Strategist, said in ING Think’s Commodities Daily that sentiment in the oil market continues to weaken. ICE Brent came under further pressure on Tuesday, settling more than 1 per cent lower and taking prices below $78 a barrel.
“A bearish overnight API release is likely to keep pressure on the market in the immediate term. API data shows that US crude oil inventories rose by 4.1 million barrels over the last week, very different to the more than 2 million barrels decline the market was expecting. Cushing crude oil stocks also increased by 1 million barrels, while gasoline and distillate inventories rose by 4 million barrels and 2 million barrels, respectively,” they said.
While the market has been disappointed that OPEC+ will gradually unwind cuts, it is important to remember that this is only from October. “Our balance sheet continues to show a tightening in the oil market over the third quarter,” they said in the ING Think’s Commodities Daily.
China’s PMI up
Meanwhile, Caixin China General Services purchasing managers’ index increased to 54.0 in May from 52.5 in April. This was the 17th straight month of expansion. Market was expecting to be around 52.6. The 50-mark separates expansion from contraction.
According to reports, new business and export orders grew the most in a year due to strengthening domestic and external demand, and employment increased for the first time in four months.
China is a major consumer of crude oil in the global market, and the improvement in economic activities in that country will help boost demand for the commodity.
Jeera fizzles, cottonseed oilcake gains
June natural gas futures were trading at ₹221.30 on MCX during the initial hour of trading on Wednesday morning against the previous close of ₹219.60, up by 0.77 per cent.
On the National Commodities and Derivatives Exchange (NCDEX), June cottonseed oilcake contracts were trading at ₹2631 in the initial hour of trading on Wednesday morning against the previous close of ₹2622, up by 0.34 per cent.
June jeera futures were trading at ₹28,085 on NCDEX in the initial hour of trading on Wednesday morning against the previous close of ₹28,420, down by 1.18 per cent.