Oil prices surge, markets narrow odds on Fed hike Oil prices surged on Monday after Saudi Arabia and other OPEC+ oil producers announced a surprise round of output cuts, a potentially ominous sign for global inflation just days after a slowdown in U.S. price data had boosted market optimism. Brent oil futures jumped $5.16 to $85.05 a barrel on news output would be cut by around 1.16 million barrels per day, while U.S. crude climbed $4.88 to $80.55. The change comes before a virtual meeting of an OPEC+ ministerial panel, which includes Saudi Arabia and Russia, and which had been expected to stick to 2 million bpd of cuts already in place until the end of 2023. The latest reductions could lift oil prices by $10 per barrel, the head of investment firm Pickering Energy Partners said on Sunday. The surge in energy costs somewhat overshadowed Friday’s slower reading for core U.S. inflation which had seen Wall Street end the month on a strong note. S&P 500 futures dipped 0.4% on Monday, while Nasdaq futures lost 0.7%.MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.2%. Japan’s Nikkei edged up 0.4%, though a survey of manufacturers came in just under forecasts. The jolt to inflation expectations saw yields on U.S. two-year Treasuries rise 3 basis points to 4.104%, while Fed fund futures pared back expectations for rate cuts later in the year. The market nudged up the probability of the Federal Reserve hiking rates by a quarter point in May to 61%, from 48% on Friday, and had 40 basis points of cuts priced in by year end. That in turn helped the dollar gain 0.25% on the Japanese yen to 133.14, while the euro eased almost 0.4% to $1.0802. The rise in oil prices is bad news for Japan’s trade balance given it imports most of its energy.The lift in the dollar and yields nudged gold prices down nearly 0.5% to $1,958 an ounce. The outlook for U.S. rates could be impacted by data on ISM manufacturing and payrolls out this week, though the reaction to Friday’s jobs report will be muted by the Easter holidays.Central banks in Australia and New Zealand hold policy meetings this week, with the latter expected to hike by another quarter point to 5.0%. Markets are wagering the Reserve Bank of Australia (RBA) will pause its tightening campaign after 10 straight rises, though analysts are more divided on whether it might still hike.
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oilseeds crop to hit the market.
If the current trend continues for a longer period of time, not only oil mills but oilseeds growers will also not be able to get good rates of their produce, says Samir Shah, president of Gujarat State Edible Oils and Oil Seeds Association (GEOA). Shah who is also past president of SOMA says that due to various international factors rates of edible oils had gone up considerably, especially imported oils earlier this year.
“With a view to curb rising prices of edible oil, the Government of India reduced import duty on edible oils. Considering the fact that India is producing hardly 30 percent of its edible oil requirement, the decision was right at that point of time. Now when international prices of edible oils have gone down by 15 percent to 25 percent and high production period has started in edible oil exporting countries, the government should gradually increase import duty to protect local oil mills and oilseeds growers,” said Shah. GEOA has also made representation before Union Minister for Commerce & Consumer Affairs, Piyush Goyal to increase import duty.
In June import duty on edible oils was ranging from 35 to 55 percent, since then the government gradually reduced import duty and at present it is ranging from zero percent to 15 percent on different edible oils, he said.
Just a month back prices of edible oils were through the roof and the government took appropriate measures by reducing import duty in order to protect consumers, says Atul Chaturvedi, president of Solvent Extractors Association of India (SEA). “Prices of edible oils are coming down globally. Kharif sowing has already started across the country. In the interest of local farmers, it is high time to enhance import duty in a phased manner to encourage local edible oil value chain,” opined Chaturvedi.
On Thursday imported Palm oil prices were at around Rs 2100 per 15 kg as against local Rs 2700 and Rs 2550 of groundnut and cottonseed oils. Prices of other local oils including ricebran, coconut, soyabean and mustard remained as high as Rs 2350, Rs 2520, Rs 2500 and Rs 2580 respectively.
India imports around 13-13.5 million tonnes of edible oils, of which around 8-8.5 million tonnes (around 63 per cent) are palm oil. Though the price of other imported Sunflower oil remained at around Rs 2700 per 15 kg, but import quantity of the oil is much lower than that of palm oil.
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