 "Crude Oil prices may decline further, test $80-mark; China demand a concern")
Crude oil retreats amid peace talks in middle east
Crude oil prices moderated on Monday to settle a percent lower at $82.33, after gaining 2.1 per cent in the previous week. A stronger dollar on Monday was bearish for crude prices. Also, concerns receded that Hurricane Beryl would impede oil operations in the Gulf of Mexico after the hurricane made landfall in Texas Monday and turn into tropical storm.
Macro data
The economic data released were not supportive for crude oil demand as US hiring is showing slowdown while Monday's global economic news was weaker than expected and bearish for energy demand and crude prices. The Eurozone July Sentix investor confidence index fell -7.6 to a 4-month low of -7.3, weaker than expectations of -0.5.
Weak German trade news is bearish for economic growth and energy demand after German May exports fell -3.6 per cent m/m, weaker than expectations of -2.8 per cent m/m and the biggest decline in 5 months. Market would focus on the US CPI, weekly jobless claims, PPI, preliminary University of Michigan Consumer Sentiments and both short term and long-term inflation expectations.
Global supply
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According to Bloomberg survey crude oil demand in China during the week ending June 28, only 86 global oil tankers indicated China as their next destination in the coming three months, five fewer than the prior week and the lowest weekly tally since August of 2022.
Weakness in crude demand in China, the world's second-largest crude consumer, is bearish for oil prices. Higher than-expected Russian crude output and exports are bearish for oil prices.
Russian fuel exports in the week to June 30 rose by +620,000 bpd to 3.67 million bpd, the most in two months. Monday's weekly data from Vortexa showed that the amount of crude oil held worldwide on tankers that have been stationary for at least a week rose +11% w/w to 86.58 million bbl as of July 5.
Baker Hughes reported last Friday that active US oil rigs in the week ending July 5 were unchanged at a 2-1/2 year low of 479 rigs. The number of US oil rigs has fallen over the past year from the 4-year high of 627 rigs posted in December 2022. EIA and OPEC will release their monthly oil report this week, while early survey for June production shows that OPEC June crude production fell -80,000 bpd to 26.98 million bpd.
Outlook
Hurricane Beryl, weakened into a tropical storm after hitting the Texas coast, easing the market worries of possible disruption in the region which accounts for 40 per cent of US crude oil production.
The concrete outcome of the ongoing ceasefire talks between Hamas and Israel mediated by Qatar could see easing od risk premiums by couple of USD. WTI gained 2.1 per cent last week after data from the Energy Information Administration showed stockpiles for crude and refined products fell in the week ended June 28.
WTI has had a very good run, though, having rallied 15 per cent from the early June low, the benchmark could see strong resistance between $86.50 based on technical charts, while we expect further sell off in the counter before making next leg of rally.
WTI Crude oil Aug: Support: $80, Resistance : $85
MCX Crude Jul: Support : 6780 , Resistance : 7100.
Disclaimer: Mohammed Imran - Research Analyst, Sharekhan by BNP Paribas, views expressed are personal.