West Texas Intermediate, or WTI crude futures slipped below $100 a barrel mark for the first time since May 11 on Tuesday – falling nearly 10 per cent in intraday trade before recouping some of the loss.
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The sharp fall, according to oil watchers, came on the back of concerns that a global economic slowdown will ultimately dent demand.
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Meanwhile, Citi on Tuesday suggested that oil prices could dip to $65 per barrel by 2022-end and $45 by the 2023-end in case of a global recession and demand tanks.
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On the other hand, oil bulls see the prices surge despite recession. Those at JP Morgan, for instance, see oil prices at $380 per barrel in a worst case scenario if Russia starts cutting crude oil production in retaliation for the sanctions.
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Christopher Wood, global head of equity strategy at Jefferies, too, expects the oil to hit $150 a barrel going ahead amid geopolitical concerns.
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One way oil can spike higher is escalation of the Ukraine conflict and a resulting decision by Europe to take concrete action to stop buying Russian energy, says Woods. Such a risk has grown with the reports of atrocities committed by Russian forces and related allegations of war crimes. All of this makes it harder to negotiate a deal, he says.
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But to what extent is the oil market pricing all the fears in, and is the fall in oil prices temporary?
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Paul Hickin, Associate Editorial Director, S&P Global Commodity Insights says dated brent will trade above $100/bbl till 2022-end. While there will be supply-side risks around Russia and OPEC+, recession fears have started to trickle in. There’s pressure on India, China from EU regarding Russian oil use, he says.
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So, all this means that we still will continue to pay higher prices for petrol and diesel for now – unless the government cuts excise duty on these two products.
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Technically, here are the key levels you need to watch on MCX Crude that trades close to Rs 7,800 mark
Source: Business Standard