Brent crude likely to trade between $75-80/bbl, fundamentals don’t support higher prices: Emkay Wealth

Stating that the fundamental factors do not support higher oil prices, Emkay Wealth Management, the wealth management arm of Emkay Global Financial Services, said that the Crude is likely to continue trading in a broad range of $75-80/bbl.

Brent is currently trading at $74 per barrel, and the range Emkay Wealth Management indicated last month was $75-80. The market traded most of the time in the lower part of the range.

“What instilled in the markets a certain amount of anxiety is the development around the Middle East conflict. Given the current setup, brent crude will continue to trade in the same price band of $75-80/bbl,” said Emkay in its report.

For now, the fundamentals are weak. There have not been any major attacks on the oilfields in Iran, OPEC, International Energy Agency (IEA), and the US EIA data indicates an oversupply of oil in the coming year.

Lastly, the demand from China for oil is weak.

“What could disrupt oil supply and therefore, adversely affect oil prices is any disruption of the traffic due to attacks by terrorists, and any potential damage to Iranian oil fields. The first factor is already there but has not been that effective as the attacks have been sporadic,” the report added.

Further, the oil supply remains unaffected, keeping prices stable without a geopolitical premium. Additionally, the U.S. sanctions on Iran’s petroleum products are still in place and have tightened.

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Estimates from OPEC, the International Energy Agency (IEA), and the U.S. EIA point to an oil oversupply next year, differing in scale but agreeing that supply will exceed demand growth.

Another factor is a weak oil demand from China, especially over the past three months, driven by lower local demand for diesel and gasoline. Chinese oil refining has also declined, potentially signaling a significant drop in China’s contribution to global oil demand growth.

Emkay Wealth believes that with these multiple factors at play, any spike in oil prices may happen only if the Middle East conflict escalates and some damage is caused to oil fields in Iran.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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