Oil in a Catch 22 situation - will prices recovers? - Angel Broking

Views of Mr. Prathamesh Mallya (Chief Analyst - Non-Agri Commodities & Currencies, Angel Commodities Broking):

"Oil prices have seen a drastic fall of more than 10 percent in the past few weeks with WTI and Brent now hovering around $44.5 and 47.5 per barrel mark. High oil inventories in the US at around 530 million barrels, OPEC and other producers ruling out deeper supply cuts, global oil inventories at around 3.06 billion barrels at the end of Feb 2017 which is 336 million barrels above the five year average, restart of oilfields in Libya, increasing rig count in the United States for continuous 15th week in a row, US oil production at 9.27 mbpd the highest since Aug 2015 are all push factors for falling oil prices.

The only good thing for oil prices to change its course now is the summer driving season in the US which would result in incremental demand for gasoline and in turn the reduction in oil inventories. However, the fall in inventory should be consistent as refineries increasing their operating capacity to satisfy the increasing gasoline demand will define how oil prices will move ahead in the months ahead.

For the time being, oil prices are like a falling knife, and catching the falling knife will harm the investors in the near term. We think WTI oil prices should go down lower towards $41 (CMP: $44.5/bbl), while MCX oil prices can move lower towards Rs.2600 (CMP: Rs.2863/bbl) can move lower towards Rs.2600/bbl."

Source : Equity Bulls

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