Crude oil futures traded higher on Thursday morning as markets expressed concerns about potential supply disruptions from Venezuela and Russia.

At 9.59 am on Thursday, February Brent oil futures were at $60.07, up by 0.65 per cent, and February crude oil futures on WTI (West Texas Intermediate) were at $56.24, up by 0.77 per cent. December crude oil futures were trading at Rs 5,100 on Multi Commodity Exchange (MCX) during the initial hour of trading on Thursday against the previous close of Rs 5,081, up by 0.37 per cent, and January futures were trading at Rs 5,120 against the previous close of Rs 5,103, up by 0.33 per cent.

In their Commodities Feed for Thursday, Warren Patterson, Head of Commodities Strategy of ING Think, and Ewa Manthey, Commodities Strategist, said oil prices rallied on Wednesday on growing supply risks facing the market. This strength has continued in early-morning trading on Thursday.

There are concerns over Venezuelan oil exports after US President Donald Trump announced that the US will impose a blockade on sanctioned oil tankers entering and leaving the country. This puts at risk around 600,000 barrels a day of oil exports, the majority of which goes to China.

However, flows to the US, currently around 1,60,000 barrels a day, will likely continue. This oil is from Chevron, which previously received a licence from the US government to continue operating in Venezuela. The key questions are, first, how effective this blockade will be, and second, how long it will last. This will be important in determining the impact on the oil market, they said.

Reports said on Wednesday that the US is preparing even stricter sanctions on Russia’s energy sector pose a larger supply risk to the market — in case Russian President Vladimir Putin fails to agree to a peace deal with Ukraine. Given the surplus outlook and Brent trading around 60 a barrel, Trump has room to be more aggressive with sanctions, they said.

Meanwhile, official data from US EIA (Energy Information Administration) showed a decline in crude oil inventories in the US for the week ending December 12. According to EIA, US commercial crude oil inventories decreased by 1.3 million barrels for the week ending December 12.

However, this was much less than the estimates of industry body American Petroleum Institute (API). API had estimated the crude oil inventories to decline by 9.3 million barrels for the week ending December 12.

Total motor gasoline inventories increased by 4.8 million barrels from last week, and distillate fuel inventories increased by 1.7 million barrels last week.

Total products supplied in the US over the last four-week period averaged 20.5 million barrels a day, up by 0.8 per cent from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.6 million barrels a day, down by 1.1 per cent from the same as the last year period. Distillate fuel product supplied averaged 3.7 million barrels a day over the past four weeks, down by 2.2 per cent from the same period last year. Jet fuel product supplied was down 2.1 per cent compared with the same four-week period last year.

December natural gas futures were trading at Rs 369 on MCX during the initial hour of trading on Thursday against the previous close of Rs 362.90, up by 1.68 per cent.

On the National Commodities and Derivatives Exchange (NCDEX), December turmeric (farmer polished) contracts were trading at Rs 16,340 in the initial hour of trading on Thursday against the previous close of Rs 15,944, up by 2.48 per cent.

December cottonseed oilcake futures were trading at Rs 3,200 on NCDEX in the initial hour of trading on Thursday against the previous close of Rs 3,125, up by 2.40 per cent. 

Source: The Hindu Business Line 

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