Crude oil in a state of supply overhang: Angel Commodities Broking

Mr.Prathamesh Mallya (Chief Analyst- Non-Agri Commodities & Currencies, Angel Commodities Broking): “Crude oil has slipped to its lowest level in almost a year at the end of June as the prospect of the continued large rise in the US production has slowed OPEC’s efforts to cut its oil output and balance the oil markets. The rising production in the US is clearly evident in the increasing rig count which as on June 23rd stood at around 758, which is a record high for 23r week in a row. Moreover, the EIA in its report released in June’17 forecasted oil production for next year (2018) to top 10 million barrels per day.

The stance of the central bank economic policies has changed very recently wherein US is on a gradual path of tightening and talking about balance sheet normalization as per the recent US FED meeting on 13-14th June 2017, while the ECB has also hinted towards gradual winding of the easy money policy. This situation will lead to a gradual tightening of liquidity which in turn would further push oil prices lower.

Oil prices can go lower towards $42 (CMP:$45.81/bbl) in the international markets while MCX oil price (CMP July Rs.2971/bbl) can move lower towards Rs.2750 in a month time frame.”