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India Crude: Bargain buying pulls up prices, gains in rupee cap rise

Tuesday, Jan 28

 

By Sayantan Sarkar

 

MUMBAI – After falling for four days, crude oil contracts on the Multi Commodity Exchange of India rose today due to bargain buying by investors, analysts said. 

 

However, a rise in the rupee against the dollar weighed on domestic contracts, as this makes dollar-denominated commodities cheaper for Indian investors. 

 

On the New York Mercantile Exchange, contracts were down as spread of coronavirus in China and other nations has sparked fears of slower growth in the global economy and a hit to demand for oil. 

 

At 1625 IST, the February contract on MCX was up 0.2% at 3,790 rupees per barrel, and the March delivery contract on NYMEX was at $52.80 per bbl, down 0.6%. 

 

The death toll from coronavirus has reportedly reached 106, and it has now spread to more than 10 countries, including France, Japan, the US, and Germany. The US has warned against travel to China, while other countries have also released advisories.

 

"Public life has halted in many places in China, which in turn means less travel activity. Furthermore, flights to and from China are being reduced, so less kerosene is likely to be consumed," Commerzbank AG said in a report. 

 

On Monday, Reuters reported that the Organization of the Petroleum Exporting Countries is having "preliminary discussions" to extend the cut in crude oil supply beyond March. The oil cartel is also discussing the possibility of a deeper cut if the spread of virus impacts oil demand, the report added.

 

The current OPEC agreement is to trim oil production by 1.7 mln bbl per day. 

 

OUTLOOK

Investors would now eye the weekly crude oil inventory data by the American Petroleum Institute, due later today. 

 

"Crude oil may witness choppy trade as market players react to development relating to the outbreak of the China virus. However, the general bias may be on the downside unless there are signs that the virus can be contained soon," Madhavi Mehta, an energy analyst at Kotak Securities, said in a note. 

 

For the rest of the day, the contract on MCX is seen at 3,693-3,911 rupees per bbl, and the NYMEX contract is seen at $51.6-$52.3 per bbl, a Kotak Securities report said.  End

 

US$1 = 71.33 rupees

 

Edited by Nidhi Chugh

 

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