Crude correction round the corner

MUMBAI: Crude oil is hovering around $76 a barrel. However, analysts expect that the market could correct in the coming week, as Opec's decision has already been factored in to the prices.

Kotak Commodities’ Si Kannan said the market has already discounted the expectations on Opec's decisions last week. The market could correct this week with investors booking profits, and re-entering the market for the long-term at $74-75 levels during the week. In domestic futures on Multi Commodity Exchange (MCX), a good level to enter the market is Rs 3,050 per barrel.

Besides, the markets would look for larger than expected decline in weekly crude inventories to remain at prevailing higher levels. Inventories are expected to decline for the week on account of lower imports into US due to recent Atlantic storms. Last Friday's gains came on the back of US data, released on Thursday, showing a greater drawdown in crude supplies than expected amid tensions in the Middle East and Nigeria.

"Expectations that Opec would continue to maintain its supplies have been diluted in the recent rally and the markets are poised for a short-term correction," said MAPE Admisi Commodity Research’s Debjyoti Chatterjee. In local markets, MCX October contract is taking cues from international trend and is expected to trade in the ranges of Rs 2,990-3,110 a barrel.

The rise last week was attributed more to refinery outages and lower refinery capacity utilisation in the US, which is the largest consumer of energy. Anand Rathi Commodities’ Kishore Narne, however, maintains a bullish view on crude. "In the near-term, crude could surpass earlier highs and touch $78-80 per barrel, but all is dependent on Opec's decision," he said.

The domestic prices are closely correlated to the international prices. Crude traded near a five-week high in New York last week triggered by speculation that Opec would leave the group's production ceiling unchanged. Oil rose 7.9% the past two weeks as hurricanes threatened crude production in the Gulf of Mexico and heating oil futures rose to a 13-month high.