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India Crude: MCX, NYMEX down on US-China trade deal uncertainty

Thursday, Oct 31, 2019

 

By Sayantan Sarkar

 

MUMBAI – Crude oil contracts on the Multi Commodity Exchange of India gave up gains and were down today tracking a fall in parent contracts on the New York Mercantile Exchange on media reports that China is doubtful of reaching a long-term trade deal with the US, analysts said. 

 

At 1828 IST, the November contract of crude oil on MCX was 0.5% lower at 3,860 rupees a barrel, while the December delivery contract on NYMEX was at $54.41 a bbl, down 1.2%.

 

According to a Bloomberg report, China feared that US President Donald Trump may back out of even the limited deal that both sides are about to sign in the coming weeks. The report also mentioned that Beijing is likely to demand an end to tariffs in order to begin any talks for "Phase Two".

 

Earlier, Chile cancelled the Asia Pacific Economic Cooperation summit in November where the US and China were expected to sign a trade deal.

 

Oil prices were also under pressure as the Energy Information Administration, late Wednesday, reported that US crude stockpiles rose by 5.7 mln bbl in the week to Friday, against the market's expectation of a 2.5-mln-bbl rise.

 

"The increase was facilitated by a noticeable rise in net crude oil imports in conjunction with only a small rise in processing," said a report in Commerzbank AG. 

 

In more negative for prices, factory activity in China declined for the sixth straight month in October to 49.3 from 49.8 in September. Analysts had expected it to remain flat. Purchasing manager's index below 50 indicate a contraction in the activities. 

 

However, a weak rupee had kept prices in a higher range for most of the day, said analysts. "MCX crude prices outpaced on weak domestic currency and marked a gain above 1% today," said an analyst at Geojit Financial. The Indian unit had depreciated 0.2% against the greenback earlier today. 

 

Oil prices were also supported after the US Federal Reserve cut interest rates for the third time in 2019 by 25 bps to a range of 1.50% to 1.75% on late Wednesday. 

 

OUTLOOK

The November contract on MCX is seen at 3,815-3,989 rupees for the rest of the session, and the NYMEX contract marked for delivery in December is seen at $53.90-$56.50, Kotak Securities said in a report.   End 

 

US$1 = 70.92 rupees

 

Edited by Maheswaran Parameswaran

 

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