India Crude: Falls on fears Fed may continue with steep rate hikes

Informist, Tuesday, Dec 6, 2022


By Sayantan Sarkar


MUMBAI – Prices of crude oil reversed all the gains from Monday in India and abroad as investors feared that the US Federal Reserve is likely to continue with steep rate hikes at its next policy meeting. 


* The US Fed has already raised interest rates by 75 basis points four times in a row this year, and the market was expecting the central bank to slow the pace of interest-rate hikes at its next meeting. 


* However, positive services industry activity for November, and robust factory activity in October in the US may provide the Fed with more room to continue with steep rate increases. Rising rates reduce liquidity in the market, which in turns limits demand for oil.


* Additionally, Saudi Arabia has cut the selling price of crude to Asian customers for January. This indicated lower demand in the region. 


* "That said, this may not take account of the latest easing of the restrictions in China as most of this probably happened after the price was set," Commerzbank AG said in a report. 


* At 1653 IST:
 –December contract on the Multi Commodity Exchange of India was down 1.7% at 6,308 rupees per bbl.

 –January contract on the New York Mercantile Exchange was down 1.1% at $76.06 per bbl. 


* On the other hand, the Group of Seven countries reportedly agreed to impose a price cap of $60 per barrel on Russian supply. 


* "The price cap of $60 won’t have much of an impact as Russia is already selling at a discount, the risk would be on Russia’s measures, where they have already threatened to not sell oil to countries adopting the price," said Ravindra V. Rao, head of commodity research at Kotak Securities. 


* Outlook for the evening session:
  –MCX contract is seen at 6,250-6,460 rupees per bbl
  –NYMEX contract is seen at $73.60-$81.50 per bbl




US$1 = 82.61 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT


Edited by Maheswaran Parameswaran


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