Oil price plunges to below $15, may slide further, expert says
Crude oil futures for 20 April contracts were trading at USD 14.83 (Rs 1134) per barrel on MCX today at 13:50, which was down by almost 21 per cent or over USD 3.92 (Rs 300) from the previous close of Rs 1436
Crude oil futures for 20 April contracts were trading at USD 14.83 (Rs 1134) per barrel on MCX today at 13:50, which was down by almost 21 per cent or over USD 3.92 (Rs 300) from the previous close of Rs 1436. The May contracts were also in red with 18 May futures trading at USD 23.61 (Rs 1807) today around this time. The prices were down by almost USD 2.61 (Rs 200) or 10 per cent on country's largest commodity derivatives exchange.
Anuj Gupta, Senior Technical Analyst at Angel Broking and Commodity and Forex market expert expects the situation to persist for some more time. Gupta said that the coronavirus pandemic has put a lot of pressure on the oil sector weakening the over all demand. In India, the story has been no different, he said expecting the prices to fall even further amid coronavirus lockdown.
The prices are down significantly.
On why the prices had continued a downward trend despite measures taken by OPEC including cut in oil production, the senior analyst said that US has been insisting on production cut to reduce losses of domestic companies. Meanwhile, the OPEC members have been reluctant and were rather looking to increase their market share by taking advantage of the global lockdown, he added.
OPEC members like Saudi Arabia were ready to sell oil on discounted rates. The production cost for OPEC members was significantly lower in comparison to the US companies.
The demand of oil in India has been down because of almost negligible activities in aviation sector and vehicular consumption. These two account for a lion share of consumption.
ATF (Air Turbine Fuel) is a big portion of the fuel consumption in India and if domestic air travel is allowed, some recovery could be made in the sector, he said.
He said that for investors, it was a good time to invest in oil stocks as valuations were low.
US crude crashed to below USD 15 a barrel on Monday, its lowest level for over two decades, as concerns about a virus-triggered demand shock and lack of storage eclipsed an output cut deal.
West Texas Intermediate (WTI), the US benchmark, fell more than 19 percent to USD 14.73 a barrel in early Asian trade, before markets steadied and it clawed back some ground to USD 15.78 a barrel.
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International benchmark Brent dropped 4.1 per cent to USD 26.93 a barrel, before rising and stabilising at USD 28.11.
Inputs from Reuters
1 USD = 76.58 (On Monday)
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