Oil prices dropped more than $3 a barrel on Thursday, November 16, extending losses from the previous session, as investors responded to signals of higher supply in the US and expectations of weak energy demand in China.

Brent futures fell $2.60, or 3.2 per cent, to $78.58 a barrel. US West Texas Intermediate crude (WTI) shed $2.65, roughly 3.5 per cent, to $74.01. Both benchmarks dropped by more than 1.5 per cent in the previous session, according to news agency Reuters.

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Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a November 17 expiry, was last trading lower by 5.18 per cent at ₹6,091 per bbl, having swung between ₹6,039 and ₹6,378 per bbl during the session so far, against a previous close of ₹6,424 per barrel.

What's weighing on crude oil prices?

-The International Energy Agency (IEA) and Organisation of Petroleum Exporting Countries (OPEC) have both predicted supply tightness in the fourth quarter, but US data on Wednesday showed inventories were abundant.

-The US government Energy Information Administration (EIA) said that US crude stocks rose by 3.6 million barrels last week to 421.9 million barrels. US crude production held steady at a record 13.2 million barrels per day (bpd).

-Chinese economic activity also rallied in October as industrial output increased at a faster pace and retail sales growth beat expectations. One of the factors giving investors pause is an expected slowdown in Chinese oil refinery throughput. 

-As the Israel-Hamas conflict appeared to be escalating in Gaza, US officials on Wednesday said they would enforce oil sanctions against Iran, which has long been a backer of Hamas, according to Reuters.

Where are oil prices headed?

Crude oil prices experienced a decline in the international markets following the US EIA report, surpassing the anticipated build of 1.8 million barrels. This downturn was exacerbated by concerns over demand from the European Union. 

‘’The upward revisions in demand forecasts for 2023 by OPEC+ and the IEA further bolstered crude oil prices at lower levels.  Anticipating continued volatility, we project support for crude oil prices within the range of $76.30–75.50, with resistance expected at $77.90–78.50. In terms of INR, crude oil finds support at ₹6,340–6,280 and faces resistance at ₹6,495–6,570,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.