Crude Oil Market Sees Weekly Gains Amid Interest Rate Cut Hopes

Price

• Crude oil futures traded lower on Friday morning but remained on track for weekly gains as recent economic data from the US spurred hopes of an interest rate cut in September.
• At 9:53 am, October Brent oil futures were priced at $80.77, down by 0.33%, while September WTI (West Texas Intermediate) crude oil futures were at $77.81, down by 0.45%. August crude oil futures on the Multi Commodity Exchange (MCX) were trading at ₹6537, up by 0.77%, compared to the previous close of ₹6487. September futures were at ₹6447, up by 0.72% from the previous close of ₹6401.

Demand & Supply

• The Dangote Refinery has faced setbacks in petrol production due to a shortage of crude oil feedstock. Despite starting diesel production in January 2024, the refinery has yet to begin producing petrol due to insufficient local crude oil supply from the Nigerian National Petroleum Company (NNPC) Limited.
• This shortfall has put additional pressure on the Naira and could force the Central Bank of Nigeria (CBN) to revert to stronger currency management. The Economic Intelligence Unit (EIU) advised that resolving this issue would significantly benefit Nigeria’s fiscal position and currency stability.
• The Dangote Refinery, with a capacity of 650,000 barrels per day, has the potential to eliminate the need for fuel imports and stabilize local fuel prices against exchange-rate fluctuations.

News

• India’s top refiner shows robust demand for Abu Dhabi light grades, as the arbitrage window for US grades remains closed for the second consecutive month.
• The EIA reported that Guyana has emerged as a significant contributor to global crude oil supply growth, producing 645,000 bpd from the Stabroek block as of early 2024.
• Guyana’s annual average production increased by 98,000 bpd from 2020 to 2023, making it the third-fastest growing non-OPEC oil producer. Crude oil production has been a major driver of Guyana’s economic growth, with the country’s GDP growing by 62.3% in 2022, the highest real GDP growth globally, according to the IMF.

Expert's Opinion

• An improvement in economic activities and a reduction in interest rates are expected to boost demand for commodities such as crude oil. The US, a major consumer of crude oil, saw an increase in crude oil inventories for the week ending August 9.
• According to the US Energy Information Administration (EIA), commercial crude oil inventories increased by 1.4 million barrels, reaching 430.7 million barrels, about 5% below the five-year average. Total motor gasoline inventories decreased by 2.9 million barrels and were about 3% below the five-year average for this time of year.