New Delhi: As the price of Brent crude crossed the $60 per barrel mark on 8 January, commodity experts have said that with the opening of economy and the pace of Covid vaccine rollout being faster than expected, the price of Brent crude may reach $80 per barrel in the next few months.
Navneet Damani, Vice President- Commodity Research, Motilal Oswal Financial Services, told The Sunday Guardian, “Fundamental picture in terms of crude oil is remaining firm for the year. The market expected that whatever cuts in the production of oil will come to normal. This was the broader expectation of the market in November and December, leading to Brent crude traded at $50 per barrel and West Texas Intermediate (WTI) at $47 per barrel.”
With the lockdown imposed in the world in 2020 and demand for oil reduced drastically, Saudi Arabia had cut the oil production. Saudi Arabia had also announced the cut in oil production of up to 1 million barrel per day in February and March after the Organization of the Petroleum Exporting Countries and allies agreed to hold output steady. Meanwhile, Russia and Kazakhstan raised oil production to a modest count.
Damani further told The Sunday Guardian, “There are several factors behind the rallying of crude prices. One, in the first week of January, Saudi announced 1 million barrel per day cut in oil production and the pace of roll out of Covid vaccine has been faster than expected. The roll-out of vaccination has enabled the economy to return to normalcy.”
He also told The Sunday Guardian, “The other factor for the rise of price in crude is money. US President Joe Biden assurance to infuse $1.9 trillion stimulus is also driving all the risky assets upward. So, money is also one of the reasons for driving all the assets to the north and the trend will continue with the opening up of global markets.”
Damani added, “Moreover, the reports coming from countries like China, US are robust. To top it up, technical breakup and everything is leading to the upside. So, whatever was hovering around $50-$52, now it has breached $62. It may touch $80 in the near future.”
With the $60 barrel per day in the international market, the price of petrol and diesel is hovering around Rs 90 and Rs 85, respectively. The price of petrol stands at Rs 94.36 in Mumbai and for diesel Rs 84.94, which is the highest in the country. With the rise of the price of crude, India’s import bill will go up. Damani said, “The rise in the price of crude will lead to rise in transport costs. And it will eventually lead to rise in vegetables and other products. There is also a mental stigma that the fuel prices are touching Rs 100 mark. The government should announce some tax cuts so that fuel gets cheaper.”