Crude oil futures crawled back to gains in the Asia electronic hours today after falling to 7 month lows yesterday hurt by the slowdown in China manufacturing and signals from the Federal Reserve that a reduction in monetary stimulus is in sight.
Equity markets continued to shed however commodities got a ray of hope from softness in the US dollar today. Crude for July delivery is trading up 15 cents at $ 95.29 per barrel on the New York Mercantile Exchange. Yesterday it lost $2.84, or 2.9%, to settle at $95.40 a barrel. Thursday’s decline was the largest since Nov. 7, 2012. The July contract will expire at the end of Thursday.
The ICE dollar index had edged down to 81.642 by late morning in East Asia, from its 81.823 level late Thursday. The dollar had rallied since the Federal Reserve’s statement late Wednesday, signaling it could slow its asset purchases this year if the economy improves further.
A weaker U.S. currency tends to support gold and other dollar-denominated commodities, as it makes them less expensive for holders of euros, yen and other units.
The weakness in the Asian equities may however put some pressure on crude oil later in the session. Asian stocks fell Friday after the Federal Reserve’s plans to gradually wind down its bond purchases led to heavy losses on Wall Street, but Chinese shares recovered from their sharp initial declines as Shanghai interbank rates reportedly came off their highs.
The Shanghai Composite traded 0.5% lower, and Hong Kong’s Hang Seng Index was off 1% by mid-morning trade in the respective markets. Both benchmarks had dropped more than 2% in early trading, but pared those losses on reports of a sharp fall in the Shanghai interbank money-market rates from the record highs they touched the previous day.
MCX July crude oil futures may open today’s session near Rs 5770 levels with resistance near Rs 5805 levels and support near Rs 5695 levels.
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