Oil prices saw a slight increase on July 20, driven by lower US crude inventories and strong buying activity from China. However, the overall demand outlook remains uncertain, leading investors to exercise caution.
Brent futures for September rose by 29 cents, or 0.4 per cent, reaching $79.75 per barrel, while August US West Texas Intermediate (WTI) crude gained 25 cents, or 0.3 per cent, reaching $75.60 per barrel. The August WTI contract is set to expire on Thursday, with the more active September WTI crude trading 35 cents, or 0.5 per cent, higher at $75.64 per barrel. On the Multi Commodity Exchange (MCX) back home, crude oil futures for August 21 expiry were trading lower by 0.05 per cent at ₹6,203 per bbl. The prices fluctuated between ₹6,126 and ₹6,254 per bbl during the session, compared to the previous close of ₹6,206 per bbl.
The prices experienced a decline in the previous session as US inventories showed a smaller-than-expected decrease.
However, China’s economic recovery post the easing of COVID-19 restrictions fell short of expectations. Although its oil prices and imports surged nearly half in June year-on-year, stock levels reached near an all-time high. China has been purchasing discounted Russian crude in a pragmatic approach.
The Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) project that China’s demand will continue to rise in the latter half of this year, remaining a significant driver of global growth. Despite China’s imports of crude oil from Russia reaching an all-time high in June, discounts against international benchmarks narrowed.
Citi analysts noted that crude prices might struggle to find a clear direction due to a mixed global demand outlook in the coming weeks. Demand shows a mixed picture, with stronger demand for gasoline and jet fuel but weaker demand for petchems and diesel.
In June, Brent crude prices surpassed the previous range of $72-$78, after being stuck there in May and June, thanks to Saudi output cuts and geopolitical risks supporting demand. However, the situation remains uncertain, and the market awaits further developments in the global demand scenario.
