Brent crude may hover around $104/bbl this year: JPMorgan

Brent crude may hover around the current level of $104 a barrel for the remaining part of the current year, but may fall to $98 per barrel next year, investment bank JPMorgan said on Friday. “Under scenarios where supply is constrained, we think oil could rally to $190/380 per barrel as well,” Sanjay Mookim, strategist and head of India equity research, JP Morgan, told FE.

International benchmark brent crude price fell below $100 a barrel on July 6 for the first time since April 25 on fears of a potential global recession. At 18:00 hrs (IST) on Friday, it was trading at around $105 per barrel. Brent reached to around $140 a barrel in early March following Russia’s aggression on Ukraine.

While an elevated price will cause a significant concern for India, Mookim said an oil price shock can further hurt global demand and drive more monetary tightening. “Elevated oil prices will be a significant concern for India. Current account balances are likely to remain negative exerting pressure on the currency. Higher inflation will be a drag on consumption and government spending.”

India meets around 85% of its crude oil need through imports. The third-largest consumer of the world imported 212 million tonne of crude in 2021-22 for $120 billion.

Citi Group recently said Brent might fall to $65 by the end of the year and further to $45 by 2023-end. Crisil expects a significant fall in oil prices only in the medium-term and said price to reach $80-82 per barrel by 2024 and moderate to $63-68 starting 2026. ICRA recently said it “expects crude prices to remain in the range of $100-120/barrel for FY2023 owing to increasing demand as lockdowns ease globally, under-investment in the upstream sector for the past several years and limited spare capacity.”

A lower oil prices would ease pressure on India’s current account deficit and have a salutary effect on the fisc as prices of many major commodities, including natural gas and subsidised goods like fertilisers, are linked to oil.

Oil minister Hardeep Singh Puri on July 7 said the recent fall in the crude oil price is out of recessionary fear and the price might come down further if global economies continue to pass through adverse circumstances.

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