Crude Oil Prices Experience Volatility Amidst Mixed Market Factors

Crude oil prices are currently being influenced by a variety of factors, both on the demand and supply sides, as well as macroeconomic indicators. Here’s a breakdown of the key drivers affecting oil prices:

1. Weak Dollar: The recent decline in the US dollar index has provided support to oil prices. A weaker dollar typically makes commodities like oil cheaper for holders of other currencies, thus boosting demand and prices.
2. Slowing Demand Growth: The International Energy Agency (IEA) report flagged slowing demand growth for oil in 2024, which has put downward pressure on prices. Despite the trimming of the growth forecast, the demand is still expected to rise, albeit at a slower pace.
3. Increased Supply: On the supply side, the IEA estimates a growth in oil supply for the year, which could potentially offset some of the upward pressure on prices caused by demand concerns. Additionally, the significant jump in US crude inventories reported by the Energy Information Administration (EIA) further added to the supply glut, weighing on prices.
4. Economic Concerns: The recessionary signals from major economies like Britain and Japan have dampened the outlook for oil demand, contributing to the bearish sentiment in the market.
5. OPEC’s Forecasts and Actions: Despite the uncertainties, OPEC has maintained relatively strong growth forecasts for global oil demand in the coming years. However, their projections are subject to various factors, including geopolitical tensions and uncertainties surrounding Chinese demand.

Considering these factors, crude oil prices are likely to continue experiencing volatility in the near term. Analysts suggest that support for crude oil prices could be found at levels around $75.30-$74.50, with resistance expected around $76.95-$77.60. In terms of the Indian Rupee (INR), support levels are anticipated around Rs6,325-6,250, while resistance is expected around ₹6,490-6,570.

Overall, while geopolitical tensions in the Middle East might provide some support to prices, the market remains vulnerable to fluctuations driven by supply-demand dynamics and economic indicators.