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Crude oil price outlook

WTI Crude oil (November) CMP $85.22

WTI crude oil November trades higher by 2.6% at $86.10 on Wednesday during the mid-European trade hours after Russia decided a partial military mobilization in war torn region of Ukraine, inflicting the fear of tighter oil and gas market in coming winter.  Oil prices are just 13% up ytd from 60% level of March when the war started. The supply distress was visible this week as the prospects of Iranian oil making its way to global market are getting bleaker as the representative from US did not expect a breakthrough on reviving the 2015 Iran nuclear deal at this week’s U.N. General Assembly. On the other hand, OPEC+ itself underproduced the quota limit by 3.58mbpd or 3.5% of global output in August, keeping the oil market tight. The API forecast ahead of EIA weekly crude oil inventory release showed build-up across the product line. The oil prices have receded 30% over last two months, largely owing to the slowdown in China, once Chinese economy gains traction, we expect crude oil prices to remain much higher from the current level. The lack of investment from the major producers have resulted in declining spare capacities resulting in much tighter market ever seen in last few decades. For the trend remains positive due to escalation of war, but traders should remain cautious ahead of FOMC conclusion, any rate hike above 75 basis point could trigger a selloff in risk assets. WTI November to face resistance around $88 with higher volatility expected throughout the day. – 

Mohammed Imran, Research Analyst at Sharekhan by BNP Paribas