Crude Oil Plunges as China Reports Rise in Covid Cases

· Poland’s Statement on Missile Crash Eases Market Fears

Crude oil futures traded lower on Thursday morning as China reported an increase in the number of Covid-19 cases.

At 10 am on Thursday, January Brent oil futures were at $91.83, down by 1.11 per cent, and December crude oil futures on WTI were at $84.42, down by 1.37 per cent.

November crude oil futures were trading at ₹6,882 on Multi Commodity Exchange (MCX) in the initial trading hour of Thursday morning against the previous close of ₹6,947, down by 0.94 per cent, and December futures were trading at ₹6,881 against the previous close of ₹6,937, down by 0.81 per cent.

The National Health Commission of China reported 23,276 new Covid-19 cases on November 16 against 20,199 on November 15. The reporting of over 20,000 new cases on a daily basis is the highest increase in seven months.

Though the number of new cases is a fraction of China’s population, the market feels that China may resort to strict measures to control the Covid outbreak.

Under its zero-Covid policy, China resorted to stringent measures such as lockdowns and intensive testing in the past few months. These measures had affected the economy.

Since China is a major consumer of crude oil, any impact on its economy would affect the demand for crude oil in the global market.

Easing geopolitical tensions

Meanwhile, the tensions over the Russia-Ukraine war spilling across the border eased bringing relief to the market. On Wednesday, Poland and NATO said the missile that crashed inside Poland was probably a stray fired by Ukraine’s air defences. They ruled out the missile being from Russian strike.

Though US witnessed a large draw of crude oil inventories, it did not impact the market much. According to the US EIA (Energy Information Administration) data for the week ending November 11, commercial crude oil inventories (excluding those in the strategic petroleum reserve) decreased by 5.4 million barrels from the previous week. At 435.4 million barrels, US crude oil inventories were about 4 per cent below the five-year average for this time of year.

US crude oil imports averaged 5.6 million barrels a day last week, a decrease of 8,95,000 barrels a day from the previous week. Over the past four weeks, crude oil imports averaged about 6.1 million barrels a day, 1.3 per cent less than the same four-week period last year.

Guar gum gains

November natural gas futures were trading at ₹506 on MCX in the initial trading hour of Thursday morning against the previous close of ₹481.70, up by 5.04 per cent.

On the National Commodities and Derivatives Exchange (NCDEX), December guar gum contracts were trading at ₹11,940 in the initial trading hour of Thursday morning against the previous close of ₹11,808, up by 1.12 per cent.

December steel long futures were trading at ₹43,860 on NCDEX in the initial trading hour of Thursday morning against the previous close of ₹44,180, down by 0.72 per cent.