Crude Oil Forecast: June MCX Crude Oil Futures May Fall to Rs 9,000/bbl on US Dollar Rise; US Fed Meets Eyes


By Jigar Trivedi

WTI crude futures eased after hitting a three-month high of $123.18 a barrel, recording the seventh weekly advance, on prospects for a recovery in demand in China and the summer driving season in the USA. Robust demand for refined products supports oil demand. U.S. retail gasoline prices have repeatedly broken records and recently hit $5 a gallon as the Americas ramped up travel despite high prices. Supply remains tight, with OPEC and its allies unable to deliver within their quotas due to a lack of spare capacity among producers, sanctions against Russia and production in Libya cut in half by the political unrest.

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Sentiments were further boosted after EIA forecasts showed total Russian liquid fuels production fell from 11.3m bpd in Q1 2022 to 9.3m bpd in 4Q23 . U.S. Crude Oil Inventories rose 2.025 million barrels in the week ended June 3, largely due to a huge SPR release. Meanwhile, crude inventories in Cushing, Oklahoma, fell 1.593 million barrels, while gasoline inventories fell 0.812 million barrels. CFTC data showed fund managers increased their bullish bets on Nymex WTI crude oil by 1,676 net longs to 284,879, the most bullish in 16 weeks.

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Crude Oil Futures Outlook

Although the oil market remains tight, we could see some pressure for the week amid a series of central bank meetings, including the FOMC meetings. The latest US inflation release for May showed prices hit a new 40-year high of 8.6%, adding more pressure on the Fed to act more aggressively, pushing the economy in a recession. The Fed is expected to raise rates by 50 basis points through September and the possibility of 75 basis points increases, which helps the dollar index.

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A higher dollar hurts all dollar-denominated commodities because it makes the commodity more expensive for other currency holders. Meanwhile, new restrictions in China, just weeks after a major easing in key cities such as Shanghai, could also weigh on sentiment. We expect June MCX crude oil futures to decline towards 9,000 rupees per barrel for the week.

(Jigar Trivedi, Manager – Non-Agro Fundamental Research, Anand Rathi Shares & Stock Brokers. Opinions expressed are those of the author.)



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