The market is exhibiting caution as it awaits a catalyst, precisely the outcome of the US debt ceiling talks, to determine its next directional move. Despite positive developments, we expect the discussions to widely go down to the wire, resulting in extreme volatility. As a result, we expect the crude prices to trade in a range, says Pritam Patnaik, Head – Commodities, HNI & NRI Acquisitions, Axis Securities.

The US debt ceiling crisis has kept crude oil prices on the edge. Do you see benchmarks Brent and WTI trading in the range for the next 8-9 days?

The market is exhibiting caution as it awaits a catalyst, precisely the outcome of the US debt ceiling talks, to determine its next directional move. Despite positive developments, we expect the discussions to widely go down to the wire, resulting in extreme volatility. As a result, we expect the crude prices to trade in a range.

What levels do you see for Brent and WTI during this period?
Off late, prices have been confined within the range of $69 and $74 for WTI and $74 and $78 for Brent. We expect this range to hold until an agreement is reached.

The US crisis could hit the consumption pattern as well in the largest economy. What impact do you see if the US fails to honour its debt by June 1?
While the likelihood of a debt default is doubtful, we expect the brinkmanship to keep the energy markets volatile. In the event of a default, the prices will crash. The USD will add velocity to the price fall, which could rally due to safe-haven demand.

While Chinese oil consumption has picked up, is it good enough to hold oil prices?
The pace of growth witnessed in the first quarter in the Chinese economy has shown signs of slowing down. However, off late, the economic data emerging out of China is below expectations, thus, clearly indicating that the road to recovery could be faster. While we expect the demand to pick up widely in the second half of the year, near-term demand is expected to expand slowly.Russian Ural prices have firmed up on demand from India, China. How good or bad is it for the global oil sector?
As the two Asian giants compete to import crude from Russia, it is natural to see positive price action. India imports nearly 1.68 million barrels from Russia or 36.4% of its monthly oil requirement. If the price arbitrage continues, the demand for Russian oil will continue to grow. On the other hand, a continuous increase in Russian oil prices could lead to its demand destruction, as the diplomatic arbitrage could out way the price arbitrage.

What should traders of MCX oil futures do?
MCX Crude oil is currently positioned near the Rs 5,940 level. Notably, the price has encountered formidable resistance around the 6100 level over the past few days, signifying a significant supply zone. Based on this observation, crude oil prices would likely trade within a range of approximately Rs 5,800 and Rs 6,100 levels.

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