Crude oil futures declined to Rs 2,872 per barrel on September 7 as participants increased their short position as seen by the open interest. Crude oil prices slipped amid weakness in the physical market and Saudi Arabia's cut in official price for October to Asia.
Oil prices hit a rough patch last week, falling 7.4 percent in line with broader financial markets.
The demand rebound is also sputtering. Prices got dented by lower refinery runs and the upcoming refinery maintenance season which is expected to dent demand for crude oil.
Along with that some strength in the dollar also weighed on the prices. Better than expected monthly US employment data revealed a drop to 8.4 percent in the August unemployment rate from 10.2 percent. The hopes for more stimulus are going out of the window and the US needs more economic activity back up to get demand flowing.
“Crude market already reflects the market’s view that rebalancing is still some time away. The contango market structure signals concerns about oversupply and describes a situation where the price of oil for future delivery is lower than for the current month," said Navneet Damani, VP Commodities Research, Motilal Oswal Financial Services.
Given the ongoing weakness indicators in the US, which is the world's largest oil consumer, plans to increase production could send oil prices crater if OPEC+ isn’t careful, he said.
“NYMEX crude trades 1.7 percent lower near $39/bbl amid Saudi’s move to cut prices for Asian markets and slower Chinese imports. Also weighing on price is a correction in the US equity market, rise in US crude oil rig count and mixed economic data. Crude's slide below $40/bbl may lead to extended losses however a sustained decline may come only if US equity markets fall further," said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.
In the futures market, crude oil for September delivery touched an intraday high of Rs 2,896 and an intraday low of Rs 2,855 per barrel on MCX. So far in the current series, black gold has touched a low of Rs 2,855 and a high of Rs 3,285.
Crude oil delivery for September slipped Rs 31, or 1.07 percent, to Rs 2,872 per barrel at 15:23 hours IST with a business turnover of 4,509 lots.
Crude oil delivery for October edged lower Rs 28, or 0.95 percent, to Rs 2,928 per barrel with a business volume of 129 lots.
The value of September and October’s contracts traded so far is Rs 666.72 crore and Rs 3.44 crore, respectively.
Tapan Patel, Senior Analyst (Commodities), HDFC Securities said MCX Crude Oil September futures has support at Rs 2,830 with resistance at Rs 2,940.
West Texas Intermediate crude declined 1.86 percent at $39.03 per barrel, while Brent crude, the London-based international benchmark was down 1.71 percent to $41.93 per barrel.
Source:-moneycontrol.com