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India Crude: Hits 1-mo high as OPEC may extend production-cut deal

Monday, Jul 1, 2019

 

By Shrea Paul

 

MUMBAI – Crude oil contracts on Multi Commodity Exchange of India and New York Mercantile Exchange hit their respective one-month highs due to expectations that the Organization of the Petroleum Exporting Countries and its allies will extend the production cut deal following positive comments from major exporters Russia, Saudi Arabia along with Iran, analysts said.

 

On NYMEX, the futures breached the psychologically crucial $60-a-barrel mark and traded near 3% higher on expectations that the producers may reach a deal to cut output as well as on US-China trade truce optimism. On MCX, the gains were muted as it factored in the movement in NYMEX futures post domestic market hours on Friday. On Friday, NYMEX futures ended 1.6% lower while those on MCX ended 0.5% lower. 

 

At 1726 IST, the July crude oil contract on MCX was at 4,159 rupees a barrel, up 1.6%, after hitting a high of 4,168 rupees. the August delivery contract on NYMEX was at $60.22 a bbl, up 3% from the previous close after hitting a high of $60.28.

 

After Russia, now Iran has backed extending the production cut agreement by six-nine months, according to media reports. Iran has no difficulty with extending output cut deal and that the extension of six to nine months are acceptable either way, as per media reports that cited Iranian oil minister Bijan Namdar Zanganeh.

 

"As far as the length of the extension is concerned, we have yet to decide whether it will be six or nine months. Maybe it will be nine months. In any event we will support the continuation of agreements, both Russia and Saudi Arabia, in the volumes previously agreed," media reports quoted Putin as saying at a news conference in Osaka on Saturday.

 

A meeting of the Members of the Organization of the Petroleum Exporting Countries is underway to review the pact, while it will hold a meeting with other producers on Tuesday.

 

"In other words, the OPEC+ meeting that begins today is unlikely to result in any more major surprises. The only remaining question will probably be whether Saudi Arabia will be able to push through its proposed nine-month extension to March 2020. This would take account of the seasonally weak demand in the first quarter of a year, and would prevent any significant oversupply," accoeding to a report by Commerzbank AG.

 

On the US-China trade front, Washington said it would indefinitely shelve plans to impose tariffs on additional $300 bln worth of Chinese imports and restart talks with Beijing. US President Donald Trump also said he would allow US firms to do business with Chinese telecom giant Huawei Technologies. China, on the other hand, has agreed to make new purchases of US agricultural products.

 

OUTLOOK

"We recommend some caution as OPEC is still undecided on tenure of production cuts while US-China trade issues are not resolved completely. Hence, one must wait for corrective dips to create fresh long positions," as per a report by Kotak Securities.

 

For the rest of the session, the MCX contract is seen finding support at 4,000 rupees and resistance is likely at 4,189.50 rupees. The NYMEX contract is seen in a range of $56.75-$61.90 a bbl.  End

 

US$1 = 68.9450 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Mainak Moitra

 

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