Brent crude oil prices have continued their upward surge on Thursday reaching $97 per barrel in morning trade. This represents a 3 per cent increase overnight and a significant 30 per cent rise throughout the third quarter of this year.
If this trend continues, it could make the current quarter the most profitable for crude oil prices since early 2022, according to experts.
Several factors have contributed to this price rally, including a substantial reduction in US crude oil stocks, which have fallen well below the critical threshold of 22 million barrels.
Additionally, geopolitical actions such as Saudi Arabia’s production cuts and Russia’s export restrictions have heightened concerns about tight global oil supplies.
But as Brent prices approach $100 a barrel, concerns are mounting that central bankers will be forced to persist with high interest rates to curb sticky inflation fuelled in part by the high cost of energy.
In the afternoon trade prices edged lower on growing expectations that key Western economies will maintain high interest rates to tackle stubborn inflation.
By 1312 GMT, Brent crude futures were down 66 cents at $95.89 a barrel after rising to their highest level since last November earlier in the session. The November contract expires on Friday.
Rising crude oil prices which hit their highest levels in 2023 took its toll on equities with the Sensex crashing more than 610 points to 65508.32 and the Nifty tumbling below 19600 a key support level.
Market circles said the nervousness over rising crude prices, which can impact inflation and delay potential interest rate cuts by the Reserve Bank of India (RBI), coupled with selling in IT and auto stocks and index majors such as Reliance Industries drove the key indices lower. Cues from overseas were also not supportive as benchmarks such as Nikkei and Hang Seng were also trending in the red.
"After a firm opening, markets lost ground immediately and plunged deep into the red in the second half as IT, metals, FMCG and automobile stocks led the slump in key benchmark indices. Markets were range-bound in the last few sessions and one was anticipating a sharp fall,” Shrikant Chouhan, head of research (retail), Kotak Securities said.
He said the weak global factors have been weighing on investors’ minds. If the dollar and bond yields maintain their ascent, the downward trend may continue for some more time. Yields on the 10-year US treasury were trading nearly 4.63 per cent against the previous close of 4.62 per cent.
Provisional data showed foreign portfolio investors (FPIs) net selling stocks worth Rs 3,364 crore on Thursday.
After being net buyers from March-August, they have sold stocks worth Rs 14,768 crore this month.
With inputs from Reuters