This expert does not see oil prices receding much from current levels

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Vandana Hari, Founder and CEO of Vanda Insights, suggests that whether Brent crude stabilises around the $75 to $80 per barrel range or stays nearer to $85 to $90 per barrel depends largely on the developments in the conflicts between Iran and Israel, as well as Ukraine and Russia.

According to Vandana, the geopolitical tensions have resulted in a premium in crude of $12-15 per barrel taking it to $90 per barrel currently. “I don’t see that receding much,” she said.

She believes a substantial pullback will be needed. “Some sort of a ceasefire agreement, some temporary rapprochement in Ghaza and then followed by a more enduring peace deal over there. That premium remains intact. There is a bit of premium on account of the heightened warfare between Ukraine and Russia as well,” she explained.

Oil prices jumped $3 a barrel on Friday in reaction to unconfirmed reports on X that explosions had occurred in Iran, sparking concerns that Middle East oil supply could be disrupted.

Brent futures jumped $3.03, or 3.5%, to $90.14 a barrel by 0147 GMT, and US West Texas Intermediate crude rose $3.03, or 3.7%, to $85.76 per barrel.

Amrita Sen, Founder and Director-Research, Energy Aspects sees the potential for it to reach triple-digits if geopolitical tensions get out of hand.

“The one that is potentially a threat to supply and probably the biggest threat this year is Ukraine-Russia,” she said.

Oil marketing companies (OMCs) also indicated that with two to three months of contracts already in place, they may have headroom to deal with higher crude oil prices for now. However, if crude continues at $90 beyond May–June, it may pose some concerns. Brent crude prices have been hovering around this level since September last year, after the OPEC+ extended production cuts.

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With inputs from agencies

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow