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Crude oil rallied to a 11-week high in global platforms on brighter demand prospects. OPEC+ is set to boost production in the upcoming moths as the oil cartel assess that the market could absorb extra barrels.

Global Economy

* Global equities were mostly higher last week. US Dow Jones Index gained 0.94 percent. European peers were also over green terrain. Among major Asian peers China’s SSE composite index gained 3.28 percent, India’s Sensex gained 1.75 percent and Japans NIKKEI gained 2.94 percent.

* US President Joe Biden proposed a $6-trillion stimulus plan for the coming fiscal year.  US Consumer Confidence Index held steady in May, following a gain in April. The Index now stands at 117.2, down marginally from 117.5 in April.

* US economy grew by an annualized 6.4 percent in the Q1 2021, matching the advance estimate and following a 4.3 percent expansion in the Q4 2020.

Currencies

* US Dollar perked up against the currency basket last week after hitting almost 5-month low.

* Euro gained by 0.08 percent. Chinese Yuan gained 1.04 percent while Japanese Yen shed 0.79 percent against greenback.

* Indian Rupee strengthened by 0.58 percent against dollar and settled at 72.4 marks.

Energy

* NYMEX crude gained 4.31 percent last week, ICE Brent gained 4.80 percent.

* MCX crude futures gained 4.21 percent in the last week.

* OPEC and its key allies meet on June 1st Tuesday.  OPEC+ set to proceed with plans to boost July oil production.

Crude Oil

Crude oil hovers at 11-week high

Crude oil continue to trade on firmer note on the prospects of brighter demand. The benchmark prices rallied to eleven week high last week. The ministers of the OPEC+ group are scheduled to meet on June 1st. In this meeting market expects no surprises despite this year’s track record of decisions surprising the market to both the bullish and bearish sides. Despite the resurgence of COVID in major oil-importing markets in Asia such as India and Japan, OPEC and its allies expect the market to absorb the additional barrels as the cartel decide to ramp up production. That is even if Iran returns legitimately among the oil exporters at some point in the second half of this year.

The West Texas Intermediate crude oil in NYMEX hit an eleven week high last week before settling at USD66.32 per barrel gaining 4.31 percent. The ICE Brent crude oil gained 4.80 percent to USD69.63 per barrel last week. MCX crude oil near month futures gained 4.21 percent to Rs.4855 per barrel.

OPEC+ set to proceed with plans to boost July oil production

The collective OPEC+ oil production is set to rise by 350,000 bpd in both May and June and by more than 400,000 bpd in July. Additionally, Saudi Arabia is also gradually easing its extra unilateral cut of 1 million bpd over the course of the next few months, beginning with monthly production increases of 250,000 bpd in both May and June. Overall, OPEC+ is expected to return to the market as much as 2.1 million bpd by July. The decision from early April signaled the confidence of the leaders of the OPEC+ alliance that the market would be able to absorb that much supply as vaccination programs are accelerating and people start traveling more. OPEC+ and all analysts expect global oil demand to rebound strongly in the second half of 2021 and nearly reach pre-crisis levels by the end of the fourth quarter this year.

Money Managers add net Longs in NYMEX Crude F&O

According to Commodity Futures Trading Commission (CFTC), the money managers increased bullish positions and reduced bearish positions in US crude futures and option contracts last week. The net long positions in NYMEX crude oil F&O contracts increased.

US crude inventory

US EIA Crude stockpiles fell by 1.662 million barrels in the week ended 21 May 2021. Distillate inventory, which included diesel and heating oil, fell by 3.013 million. At the same time gasoline stocks fell by 1.745 million barrels in the week. Refinery operated at 87.0 percent of total capacity.

Technical Outlook

Global oil markets are now balanced, but, the dynamics may be changed soon as the markets are heading towards the crucial events like OPEC+ meeting and the key US-Iran nuclear deal. US production numbers and the pace of global economic recovery, especially in the emerging markets will also influence the short term price outlook of the commodity.

NYMEX Jun: Consistent trades above $67 is needed to trigger fresh rallies in the counter. Else, there are chances of corrective selling, but a close below $61 can be considered as a downside reversal point.

MCX Jun: Resistance is seen at Rs 4940 a break of which it may extend sharp rallies in the counter. Else, choppy trading may be seen with stiff support placed at 4220.

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