Oil prices have slipped below 100 dollars a barrel in the past couple of days.
Weighing on crude price is the US Energy Information Administration’s weekly inventory report, which suggested an unexpected increase in US crude oil stocks and drop in gasoline demand, despite ongoing summer driving season in the US.
While global central banks, especially the US Federal Reserve, has hiked rates to tame inflation and kill demand, OPEC+ has decided to raise its oil output goal by 100,000 barrels per day starting September.
The increase is equivalent to 0.1 per cent of global demand.
It follows weeks of speculation that Biden’s trip to the Middle East and Washington’s clearance of missile defence system sales to Riyadh and the United Arab Emirates will bring more oil to the world market.
Notably, the increase of 100,000 bpd will be one of the smallest since OPEC quotas were introduced in 1982.
Ravindra Rao of Kotak Securities, for instance, expects prices to slip further in the immediate short-term.
“Crude has hit fresh lows which indicates weaker sentiment. However, supply concerns may keep a floor to price close to $90/bbl level,” says Ravindra Rao, VP & Head of Commodity Research, Kotak Securities
Brent prices have been volatile thus far in 2022, as the oil market reacted to the geopolitical developments amid recession fears.
Paul Hickin, Director of S&P Global Commodity Insights expects the Brent oil to climb and remain in a range of 100 – 120 dollars a barrel in the medium-term.
Speaking to Business Standard, Hickin said, OPEC+ decision is a symbolic nod to the US. Spare capacity is at historic lows. Weak demand amid recession fears in the US and Europe. Russian supply has not come off as expected. Oil likely to stay over $100/barrel.
On Friday, all eyes will be on the outcome of the Reserve Bank of India’s meeting on interest rates. Analysts expect the Indian central bank to hike repo rate between 35 – 50 basis points. That apart, stock specific action will continue amid the ongoing result season.