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Last Updated : May 19, 2019 08:18 AM IST | Source: Moneycontrol.com

Crude oil: Geopolitical issues keeping traders guessing

The forecast of OPEC suggests the market might shift into a deficit in the Q2 and Q3 of 2019 if the OPEC+ group continues to keep its oil production at the current levels. The major supply concern is the impact of sanctions on Iran’s oil output and exports and how will the OPEC and its allies be able to deal with it.

Moneycontrol Contributor @moneycontrolcom

Sakina Mandsaurwala

Precious metal complex ended in losses last week, with gold prices having sunk $14 to $1,286/oz while Comex Silver prices lost 1.5 percent over the last week after the release of better than expected US economic releases. Gold prices reversed gains this week due to strong US corporate earnings that led to a stronger dollar and higher yields.

Base metal complex remained largely unchanged with Aluminium being an exception showing an upside of four percent last week while all other metals traded with gains/losses of around one percent. Aluminium prices are seeing strength from a supply tightness in the Chinese alumina market.

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Energy complex closed the week on a mixed note with Nymex Crude gaining ground on worries over increasing supply tightness while Nymex natural gas closed the week with 1 percent gains.

Crude oil prices are taking support from the ongoing Middle East tensions, which are mounting concerns over supply disruptions. Looking at the global demand supply picture, it says the market stays tightly balanced in the first quarter of 2019.

The forecast of OPEC suggests the market might shift into a deficit in the Q2 and Q3 of 2019 if the OPEC+ group continues to keep its oil production at the current levels. The major supply concern is the impact of sanctions  on Iran’s oil output and exports and how will the OPEC and its allies be able to deal with it.

US production is growing slowly due to slowdown of the drilling at its oil rigs. Crude oil inventories are expected to fall in the second half of the year as the refineries restarts after the maintenance.

With the upcoming supply tightness from Iran, Venezuela and with targeted level of production from OPEC+ nations and expected drawdown in crude oil inventory draws makes near term price movement susceptible to sporadic rally and a move towards$68-$70 per bbl in the coming quarter of 2019.

However, if the OPEC and its allies agree to increase oil production in the June 25-26 meeting or United States eases sanction pressure on Iran and Venezuela, the fortunes of oil prices may reverse. At present, Nymex Crude oil prices are trading at  $63.2 per barrel.

The author is Commodity Analyst at Narnolia Financial Advisors.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on May 19, 2019 08:18 am
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