In a bid to ease crude supply shocks and cool off prices, the Organization of the Petroleum Exporting Countries and its allies have decided to boost output by 6,48,000 barrels per day in July and August, higher than 4,32,000 bpd as previously agreed.
Even though the increases were divided proportionally across the member countries, analysts said the supply increase was likely to be less than the announced volume.
That’s because Russia is included in the pact, which is facing sanctions. Russian output has already dropped by 1 million bpd since its invasion of Ukraine, and is likely to fall further as the European Union’s ban on Russian oil kicks in.
Moreover, members like Angola and Nigeria are already failing to meet their existing targets.
Given this, Paul Hickin of S&P Global Commodity Insights is sceptical on the bullish oil outlook. He says, only Saudi Arabia, UAE has extra capacity. Extra crude might not offset lost Russian barrels. He hopes that the supply keeps a cap on prices.
Hickin is also cautious on easing oil prices as he believes the real caveat to this bullish narrative is demand destruction, depending on the global economic downturn.
Nonetheless, a relief rally cheered global markets on hopes of peaking inflation.
However, benchmark indices surrendered gains in a fag-end selloff and closed flat, last Friday.
During the week the BSE Sensex index gained 5.28 points. With this, it has gained over 5 per cent in the last three weeks. However, the Nifty slipped 0.05 per cent for the week, whereas, the Bank Nifty dropped 0.95 per cent
Going forward, last week’s OPEC+ decision, and a pick-up in high-frequency indicators for the domestic economy, will put the spotlight on RBI’s meeting this week. Markets are baking-in a 35-50-basis point repo rate hike, with cash reserve ratio kept untouched.
Overall, an eventful week is on cards for the markets, with interest rate decision, IIP data, crude oil prices, and global cues acting as key triggers.
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