4 reasons why crude oil is not likely to sustain $80/bbl. How is India impacted?
Tired of too many ads?
Remove Ads
Here are 4 reasons why Brent may sustain $80 per bbl:
1) Iran's Strait of Hormuz gamble too costly to close
Tired of too many ads?
Remove Ads
2) OPEC production
3) US Shale factor
4) Global oil demand growth projections
Impact on India
Tired of too many ads?
Remove Ads
While the Israel-Iran tension has kept crude oil on the boil with an 8% jump in the past eight days and 23% over a month, the black gold is unlikely to breach the $80 per barrel mark, according to estimates by a couple of brokerages."While the Iran–Israel conflict is serious and merits close monitoring, we reckon Brent Oil price is unlikely to sustain above US$80/bbl in a durable way unless the Strait of Hormuz is closed, or critical Gulf infrastructure is targeted," Yes Securities said in a note. ICRA too expects crude prices to average between $70-80/bbl for FY2026.Despite persistent geopolitical tensions and repeated threats, ranging from the Iran–Iraq War to post-Iran Nuclear deal fallout, Iran has never acted on its threat to close the Strait of Hormuz.Yes Securities calls this restraint strategic and economic. The Strait handles nearly 20% of global oil consumption and is vital for Qatar's LNG exports, Iran's own trade, and the energy trade of regional allies like Iraq. A full closure would not only trigger military retaliation, particularly from the US, but also damage Iran's economic interests and international standing, this brokerage said.Tehran has wielded the threat of disruption as a geopolitical bargaining tool, without crossing the line into direct confrontation, Yes noted.With OPEC holding spare capacity of 4mbpd—well above Iran's 1.5mbpd exports—and a projected global market surplus of 0.9mbpd before the Israel-Iran flare-up, there is ample supply cushion.Yes believes that even if Iranian supplies of 1.5mbpd are taken out, OPEC's spare production capacity of 4mbpd is good enough to compensate for the fall.Since 2008, the rise of US shale has added millions of barrels per day to global supply, increasing flexibility and price elasticity. This has allowed the market to absorb geopolitical shocks more effectively, with tensions involving Iran, Libya, or Venezuela causing only short-lived price spikes."OPEC's diminished market share and increased spare capacity, especially from Saudi Arabia and the UAE, have further capped volatility, making oil prices more range-bound and positioning US shale as a soft ceiling on prices," Yes Securities said.China, which is the second largest consumer of oil, has seen a subdued demand post-COVID due to economic rebalancing and a weak real estate sector, Yes Securities said. Long-term energy transition trends such as the rise of electric vehicles, improved fuel efficiency, and supportive green energy transition policies are further restraining demand growth in OECD countries."This softened outlook is mirrored in recent agency forecasts. The International Energy Agency now expects global oil demand to grow by about 0.72mbpd in 2025, down from the earlier estimate of 1mbpd. EIA now projects global oil consumption to rise by 0.8mbpd in 2025, down from the earlier projection of 1mbpd," Yes said.According to ICRA, crude oil imports from Iraq, Saudi Arabia, Kuwait and the UAE that pass through the Strait of Hormuz (SoH) account for 45-50% of total crude imports by India. Moreover, about 60% of the natural gas imports by India pass through the SoH.A $10/bbl increase in the average price of crude oil for the fiscal year will typically push up net oil imports by $13-14 billion during the year.At these elevated crude oil prices, while the profitability of upstream players will remain healthy and their capex plans will remain intact, the marketing margins of downstream players will be impacted, along with the expansion of LPG under-recoveries.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Mint
3 hours ago
- Mint
EM Debt Hedge Funds Eye Safeguards as World-Beating Rally Blooms
(Bloomberg) -- Hedge funds dedicated to emerging-market debt are increasingly turning to risk-mitigating strategies to ensure they lock in double digit gains as a broad rally in developing nation assets deepens. After a banner first half of the year, hedge funds targeting EM debt have returned nearly 13% on an annual basis — more than their peers positioned in any other asset class, according to data based on Bloomberg indexes. The latest global financial flows data shows the asset class remains thriving and the extra yield investors demand to hold the sovereign debt of developing nations over US Treasuries just hit a 15-year low. Such tight pricing, along with uncertainty over US policies and global conflicts, is pushing hedge funds to curb risks as they ride the historic rally. The funds do this by swapping longer-maturity bonds in their portfolios for less risky shorter-dated ones. They also focus on higher-rated debt and the most-liquid securities while keeping an ample cash pile. 'Do you just want to be massively long on credit on these valuations? I'd say probably not,' said Anthony Kettle, who co-manages BlueBay Emerging Market Unconstrained Bond Fund with Polina Kurdyavko and Brent David. 'Having a little bit of dry powder evidently makes sense, and also running elevated cash levels.' To be clear, Kettle said, there's still a 'decent environment' to gain additional returns as funds become more selective and can profit from both rising and falling asset prices, unlike index-based investors. The $784-million BlueBay fund has returned 17% over the past 12 months. Investors have taken advantage of EM inflows stoked by increased interest for alternative assets amid US policy unpredictability, which has also weakened the dollar. While many developing countries have come out of distressed debt levels as sentiment improved, further risks include another Iran-Israel flare up and potential additional increases in US tariffs, including on the buyers of Russian energy. President Donald Trump's administration has caused a 'breakdown of the traditional safe haven correlations' by shaking up the post-Cold War world order, creating an 'unusual and unpredictable' environment, said Demetris Efstathiou, the chief investment officer of Blue Diagonal EM Fixed Income Fund. 'It is very hard to predict what they will do next with tariffs, and on top of that you have ongoing wars,' Efstathiou said. His fund is 'very conservatively' positioned with shorter-maturity bonds and he avoids weak credits to protect the portfolio in the event of a global slowdown and market downturn. He has increased holdings of AAA- and AA-rated EM sovereigns along with less-indebted countries with large domestic markets like Brazil, Turkey and Mexico. EM-dedicated bond funds have received $31 billion in inflows year-to-date, with positioning increased in each of the last 14 weeks as global markets recalibrate after an era of US dominance. A near-record $5.7 billion piled into the asset class in the week though July 23, according to EPFR Global data provided by economists at Bank of America Corp. For some, flows of such a magnitude signal that EM debt is already predicting the best-case scenario. 'The market is now priced for a Goldilocks scenario with the risk of a severe recession receding significantly and expectations' of one or more rate cuts by the Federal Reserve, the $847 million Enko Africa Debt Fund said in a letter to clients. Managed by Alain Nkontchou, the Africa-specific hedge fund has returned 24% over the past year. Nevertheless, the expected volatility means that traditional buy-to-hold trades may not necessarily succeed and that hedge funds will prioritize holding more liquid assets to ensure an easier exit in case sentiment turns, according to ProMeritum Investment Management LLP, a $700-million fund that invests in developing markets outside China. 'Liquidity management will be critical in the second half of the year because of an unpredictable environment and geopolitical risks,' said Evgueni Konovalenko, managing partner and head of strategy at the firm. Such a focus is needed 'to take advantage of both short and long positions with sudden policy changes and a daily barrage of headlines.' --With assistance from Jorgelina do Rosario. More stories like this are available on
India.com
3 hours ago
- India.com
'Google-like brain' now in fighter jets, flying devils of the new war are getting ready with AI tech, more deadly because..., India has...
Sixth-generation fighter jets Sixth-generation fighter jets: The recent global conflicts including the Iran-Israel war, India-Pakistan conflict and the Russia-Ukraine war has seen how important fighter jets have become for proving military and air superiority. With their most powerful and stealth fighter jets, countries have not only shown their attack capabilities but also the level of defence technology they actually possess. In this article, we will talk about the most modern sixth generation fighter jets which are making global headlines due to their strength and intelligence capabilities. How sixth-generation fighter jets are different? Keeping in mid the recent technological advancements, sixth-generation fighter jets are set to redefine air combat with cutting-edge stealth, artificial intelligence, and futuristic designs. The next-gen sixth‑generation fighters mark a major leap beyond the fifth generation, integrating google-like brain, advanced stealth, AI‑powered systems, and multi‑role avionics. One of the most important features of the sixth-generation fighter jets is the fact that the aircrafts will feature AI-powered systems, radar-absorbing coatings, internal weapons bays, and tailless stealth designs that reduce visibility across multiple spectrums. Unlike the currently used fighter jets, sixth-gen fighters will rely heavily on autonomous operations and data fusion, which will enable them to act as command centers in the sky, as per a report by News 18 Hindi. India's 5th-generation stealth fighter jet gets key clearance Defence Minister Rajnath Singh recently approved the Execution Model for the Advanced Medium Combat Aircraft (AMCA) programme in a major push towards Atmanirbharta (self-reliance). As per a report by IANS news agency, the AMCA clearance marks a critical step towards realising India's goal of joining an elite club of nations in designing and producing its own fleet of next-generation combat aircraft. What is India's answer to fifth-generation air power? The AMCA, widely seen as India's answer to fifth-generation air power, will give a major boost to achieving 'atmanirbharata' in the defence sector and will become a hallmark of India's growing defence capabilities. Being the fifth-generation stealth multirole fighter equipped with cutting-edge technology, it will be suited for all-weather operation. Designed with low radar cross-section and supercruise capability, the AMCA is seen as the successor to the frontline Sukhoi Su-30MKI fighter jets. Some reports suggest that its mass production is likely to commence by 2035. (With inputs from agencies)
&w=3840&q=100)
First Post
5 hours ago
- First Post
E3-Iran nuclear talks: Slim chances for a second deal
Also known as the Iran Nuclear Deal, the Joint Comprehensive Plan of Action (JCPOA) was signed in 2015 by Iran and the E3 plus China, Russia, and the United States. Image: REUTERS Friday morning Iran resumed nuclear talks with Britain, France, and Germany (also called Europe's E3), which are parties to its 2015 Joint Comprehensive Plan of Action (JCPOA), which had codified a 3.7 per cent limit for Iran's uranium enrichment and a waiver of sanctions on Iran. But whether resumption of E3-Iran talks can facilitate revival of US-Iran talks leading to crafting a JCPOA 2.0 has serious limits so far. Prima facie, this second round of E3-Iran talks at Iran's Consulate in Istanbul continuing for four hours on Friday morning seems like a good sign for a start. The Iranian side was represented by Deputy Foreign Minister Kazem Gharibabadi, who said they had a frank, serious, and detailed discussion and 'agreed that consultations on this matter will continue'. STORY CONTINUES BELOW THIS AD Only that the JCPOA is due to expire in less than three months on October 18. The fundamental leverage that E3 has is to 'snap back' sanctions under the JCPOA, but it must start any such effort at least 30 days in advance, which leaves it with even less time. Then beyond the US, they will also have to deal with China and Russia. JCPOA Under Stress Also known as the Iran Nuclear Deal, the JCPOA was signed in 2015 by Iran and the E3 plus China, Russia, and the United States. But cracks in the JCPOA had begun early on when, in 2018, during President Trump's first term in office, the US had walked out of the JCPOA. Iran, in response, had also begun to roll back on its commitments on uranium enrichment, accusing others of not complying with their part of the JCPOA provisions. The March 2025 report of the International Atomic Energy Agency (IAEA) had concluded that Iran had reached a high level of 60 per cent uranium enrichment. Compared to its agreed 3.7 per cent uranium enrichment under JCPOA, this is much closer to weapon-grade uranium enrichment of 95 per cent. The IAEA report also reported Iran having already compiled a stockpile of 400 kg of such uranium. According to the Israeli spy agency Mossad, Iran was in position to make a nuclear bomb in 15 days time. These revelations of the IAEA coming in the midst of Israel's continuing war with Hamas and Hezbollah—also known as Iran's proxies in the region—had alarmed Western powers. The Trump presidency had responded to it by immediately initiating talks with Iran from April while keeping maximum pressure by supporting aggressive Israeli military operations. In fact these talks had witnessed an unusual hectic pace with five rounds in just two months: three in Muscat followed by two in Rome. STORY CONTINUES BELOW THIS AD US-Israeli Airstrikes It is interesting to note that the sixth round of the US-Iran talks was scheduled for 15 June at Muscat. These were suddenly scuttled due to Israeli air attacks on Iran on June 13. More startling was the fact that this was followed by American attacks on Iran's nuclear facilities at Fordow, Isfahan, and Nantaz, disrupting their nuclear talks. President Trump had claimed to have 'obliterated' Iranian nuclear facilities. But American media has since questioned this assessment, thereby putting pressure for revival of talks. In fact, along with the US-Iran talks, the E3 had also initiated talks with Iran. They held their first round in Istanbul on May 16. But following US-Israeli air strikes on Iran, the E3 had also threatened Iran with triggering 'snapback' sanctions as per the JCPOA unless Iran ensured substantial progress in talks before the end of August. This E3 ultimatum was driven partly by their limited window of less than three months' time when their option of snapback sanctions under JCPOA will expire on October 18. STORY CONTINUES BELOW THIS AD Any attempt at imposing sanctions on Iran later through the UN Security Council will face Iran's friends, China and Russia, using vetoes to block any such action. Both China and Russia have condemned US-Israeli air strikes on Iran and remain opposed to unilateral sanctions. Besides, Iran has called this E3 ultimatum a breach of their May 16 Istanbul talks, which had agreed to continue consultations. Hardening Preconditions Following these US-Israeli attacks and the E3 ultimatum, Iran has refused to cooperate with the IAEA, criticising it for bias and for not condemning these strikes on its nuclear facilities. Iran had accordingly asked IAEA inspectors to leave the country and even threatened to withdraw from the Nuclear Nonproliferation Treaty. Foreign Minister Abbas Araghchi, who recently told Fox News that their enrichment was currently 'stopped' due to 'serious and severe' damage to their nuclear sites, also underlined that 'Iran's position remains unshakeable and that our uranium enrichment will continue'. STORY CONTINUES BELOW THIS AD Iran has since reinforced its preconditions that any talks must only focus on size and levels and not on its option for uranium enrichment. That these talks will also not include other issues like its ballistic missiles or so-called proxies in the region. The US, which sees these preconditions as red lines, remains divided, with its chief negotiator, Steve Witkoff, asking Iran to return to the JCPOA-agreed limit of 3.7 per cent enrichment, while President Trump has been talking of complete dismantlement of Iran's nuclear program. Even in the face of media assessments to the contrary of President Trump's claims, he has persisted with his belief that he has 'obliterated' Iran's nuclear facilities and is in no hurry to resume talks with Iran. At the same time, Trump has shown increasing discomfort with Prime Minister Netanyahu for not agreeing to an early end to his war in Gaza, which has killed over 56,000 Palestinians. In the midst of raised tempers, negotiations have less chance of success. STORY CONTINUES BELOW THIS AD The Way Forward So the basic purpose of E3-Iran talks therefore remains breaking ice in this increasingly difficult impasse. To begin with, they seek to revive an early resumption of the US-Iran talks. This is the only way to ensure continuation of JCPOA arrangements beyond October 18. But in the face of both the US and Iran digging their heels deeper, the E3, in fact, could become increasingly vulnerable. And they also have to deal with China and Russia. Iran has reasons to suspect its interlocutors. PM Netanyahu is increasingly seen defying President Trump, and both have threatened to resume strikes on Iran. In spite of its hectic five rounds of talks with the US plus one round of talks with E3, the Israeli offensive had killed several of Iran's top commanders and nuclear scientists. Israeli Foreign Minister Gideon Saar has been urging E3 to trigger this snapback mechanism. While the JCPOA 2.0 may be a tall order, the only positive sign is Iran opening dialogue with the IAEA in the 'next few weeks' to explore possibilities for their return to Iran to resume their nuclear monitoring work. IAEA Chief Rafael Grossi said last Friday—as E3 were negotiating with Iran in Istanbul—that he is hopeful of 'starting on technical details and, later on, moving on to high-level consultations' without pushing for inspections as yet. This may not have received much media attention, but this technical approach to a political problem could be a more pragmatic way to deal with the current impasse. STORY CONTINUES BELOW THIS AD The author is professor of International Relations at Jawaharlal Nehru University, New Delhi. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost's views.
