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Oil Falls To 5 Month Low Despite Threats Of Supply Cuts

Oil fell for a fifth session, touching the lowest since early July — as a flood of US exports and doubts over whether OPEC+ will be able to deliver on its planned production cuts raised concerns about oversupply, Bloomberg reported

By Govindraj Ethiraj
New Update
Oil Falls Supply
On today’s episode, financial journalist Govindraj Ethiraj talks to Surendra Mehta, secretary general of the more than a century old India Bullion & Jewellers Association.

Our Top Reports For Today

  • (00:00) Stories Of The Day
  • (01:10) Markets hit fresh highs
  • (04:52) Oil falls to 5 month low despite threats of supply cuts
  • (06:48) Gold delivers sound returns to investors, will it stay?
  • (13:27) A 58% jump in onion prices pushes up thali costs for Indians
  • (14:48) Airline industry revenues expected to touch record $964 billion in 2024 with record passengers


NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.

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Markets

Well, another day, another high.

The Nifty and the Sensex hit fresh lifetime highs of 20958 and 69701.40. 

The Sensex finally closed at 69,653, up 357 points while the Nifty closed at 20,937, up 82 points.

There is much new buying happening, including by foreign institutional investors who have now returned after a three month hiatus of sorts that lasted into November.

And of course the confidence that there would be electoral, political and economic continuity in next year’s general elections which at this point is still around 6 months away.

Among the many asset classes, the only asset, if you want to call it that, is the rupee which has been weak.

Rupee

The rupee appreciated 5 paise against the US dollar on Wednesday led by a bullish trend in domestic equities and sustained foreign fund inflows. It ended at 83.33 a dollar as compared to the previous close of 83.38.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.07% lower at 103.97.

Elevated greenback in the overseas markets and dollar buying by the Reserve Bank of India (RBI) capped sharp gains for the local unit, forex traders told Reuters

Auto Industry Has Good November

Almost 2.9 million vehicles were sold in India in November, beating a previous record of 2.6 million in March 2020 when the automobile industry was shifting to stricter emission norms. 

Sales last month were helped by the festive season and 3.8 million weddings between November 23 and December 15, according to the Federation of Automobile Dealers' Association (FADA). 

All categories of vehicles including two-wheeler, three-wheeler, and passenger vehicle categories grew close to 20 percent year-on-year. 

Tractor and commercial vehicles dropped 21 per cent and 2 per cent.

“This is a record month (November) and we expect the momentum to continue. However, passenger vehicle inventory is a cause of concern,” said Manish Raj Singhania, president of FADA. 

Two-wheeler sales had "all-time high retails" in November, helped by Diwali celebrations and rural demand, said FADA. New product launches and better supply helped the two-wheeler market and electric vehicle sales "demonstrated an encouraging upward trajectory".

Earlier, FADA had shared that the 42 day festival period starting Navratri and onto Diwali in mid November also saw a record 10% jump in sales. 

Oil Price Slide

And now, our energy segment, in partnership with the India Energy Week.

Good news for oil consumers, including hopefully at the pump soon.

Oil fell for a fifth session, touching the lowest since early July — as a flood of US exports and doubts over whether OPEC+ will be able to deliver on its planned production cuts raised concerns about oversupply, Bloomberg reported.

Brent fell below $77 a barrel after falling more than 7% over the previous four sessions. 

Amazingly, American crude shipments are nearing a record 6 million barrels a day, according to estimates from ship-tracking firms. And more on the US in a moment.

Crude is falling despite the Organization of Petroleum Exporting Countries and its allies announcing deeper output cuts on Thursday. 

Meanwhile, Reuters is reporting that U.S. gasoline prices are the lowest they have been since January and by Christmas could fall below $3 a gallon for the first time since 2021.

Analysts are predicting this should boost consumer confidence during the holiday shopping season.

The national average price for a gallon of gasoline stood at $3.23 on Tuesday, down 15% since mid-September.

Still on energy, Adani Electricity, which supplies roughly half of Mumbai’s electric power, has said it will provide 60% renewable electricity to Mumbai by 2027, setting a global record for a large city, group Chairman Gautam Adani said on Wednesday.

Adani Electricity achieved a landmark by powering Mumbai entirely with 100% renewable energy, the company said.

Tata Power is the other supplier to Mumbai.

The energy segment is supported by the India Energy Week to be held from February 6 next year. Details at www.indiaenergyweek.com

Gold

Yesterday, we spoke of how rising gold prices were  prompting some Indians to exchange gold jewellery for new pieces as the wedding season got under way.

Spot gold has continued to hit record highs and has risen more than 10% since early October on speculation the Federal Reserve will cut rates early next year.

On Monday, Bullion climbed to a record high of $2,135 on elevated bets for a Fed rate cut, before dropping more than $100 in the same session, due to uncertainty over the timing of the monetary policy easing, Reuters reported.

As assets go, gold has done pretty well in recent years, beating many asset classes and I will come to some details shortly. 

Gold prices are now ruling over Rs 62,000 in many parts of India, also being the mark beyond which people tend to sell or exchange their gold.

The question of course is what is the prognosis and the story so far.

I reached out to Surendra Mehta, secretary general of the more than a century old India Bullion & Jewellers Association who also sets gold rates for most transactions in the country and began by asking him how he was seeing gold prices right now.

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Thali

Gold prices are up, so is the cost of food.

A sharp 58% increase in onion and 35% increase in tomato prices month over month has pushed up the cost of food served in Indian homes.

The cost of a vegetarian thali or lunch or dinner plate with multiple vegetables and dals increased 10 per cent in November as compared to October, according to rating agency CRISIL. 

As compared to last November, the price is up 9%, Crisil said.

The cost of a non-veg thali jumped 5 per cent month-on-month (MoM).

Prices of pulses, which account for ~9% of the veg thali cost, also increased 21% on-year

In its Roti Rice Rate index as Crisil calls it, the uptick in the price of veg thali was attributable to 58 per cent in onion prices and 35 per cent in tomato prices. 

Airline Industry Net Profit

Global airline industry is projected to register a net profit of $ 25.7 billion in 2024 as more normal growth is expected in both passenger and cargo segments, global grouping IATA said on Wednesday.

But more importantly, for 2023, the net profit is estimated at $ 23.3 billion, significantly higher than the $ 9.8 billion projected by the International Air Transport Association (IATA) in June this year.

Revenues for 2023 are now expected to reach $896 billion ($93 billion higher than expected). 

Airlines will have earned on average $5.44 per passenger carried in 2023.

Industry revenues are expected to reach an historic high of $964 billion in 2024. 

Some 40  million flights are expected to be available in 2024, exceeding the 2019 level of 38.9 million and up from the 36.8 million flights expected in 2023. 

IATA has more than 300 airlines as members. The airline industry's operating profit is expected to touch $ 49.3 billion in 2024 from $ 40.7 billion this year.

In 2024, the total revenue is estimated to grow 7.6 per cent to $ 964 billion compared to 2023.

"Some 4.7 billion people are expected to travel in 2024, a historic high that exceeds the pre-pandemic level of 4.5 billion recorded in 2019," IATA said.

Industry passenger load factor is nearing its 2019 level, which is supporting the financial recovery of the airlines, IATA Director Policy and Economics Andrew Matters said.

That’s it from me.