Oil Market Steady Despite Geopolitical Tensions

Despite ongoing conflicts between Israel and Iran fueling market volatility, Brent crude oil prices are projected to hover around USD 70 per barrel in FY26. A report from Emkay Research highlights that oil markets are fundamentally robust, buoyed by production from OPEC+ and non-OPEC+ nations.

The report asserts, 'We continue to assume Brent price at USD70/bbl for FY26. Fundamentally, oil markets are well supplied with rising production.' While geopolitical risks might cause short-term price swings, the steady supply is anticipated to stabilize prices. A recent Israel-Iran conflict led to a sudden 12-13% increase, pushing Brent close to USD 80/bbl.

Prices have since stabilized around USD 75/bbl despite sustained hostilities. While Iran retaliated with missile strikes on Israeli cities and Israel escalated strikes, US ceasefire signals are unclear. Short-term price movements notwithstanding, especially without notable infrastructure damage akin to that seen in Ukraine, prices are expected to stabilize, potentially dropping below USD 70/bbl with a ceasefire.

The report also notes Iran's partial shutdown of its South Pars gas field after Israeli attacks. Damage to a key fuel depot and gas refinery affected domestic markets. In response, Israel halted operations in two gas fields exporting to Egypt and Jordan, pushing spot LNG prices to USD 13.5/mmbtu from USD 12/mmbtu pre-conflict.

Looking ahead to 2025, oil inventories continue rising, keeping the market well-supplied despite transient volatility. Predictably, the Brent price for the year should average USD 70/bbl. Both upstream oil operations and Oil Marketing Companies (OMCs) find this pricing comfortable, though OMCs offer a more favorable risk-reward profile.

The report raises concerns about the gas market amid uncertain demand due to early monsoons. (ANI)

(With inputs from agencies.)