Oil to stay above $100 till Russia-Ukraine ceasefire, war premium on crude 30%: KPMG

(Representative image/Reuters)

The commodities market will continue to feel the heat arising out of the Russia-Ukraine military conflict, as crude prices are unlikely to drop below the $100 per barrel mark till a ceasefire is reached, said Regina Mayor, Global Head of Energy at KPMG.

The international market for crude oil is driven by a "perfect storm of bullish fundamentals", Mayor said in an interview with CNBC TV18, adding that the COVID-19 pandemic and the conflict in eastern Europe "showed the market is vulnerable".

"Crude oil prices are to stay above $100 per barrel till ceasefire. There is no respite till we can put the crisis in Ukraine behind," she said.

Even after the ceasefire, Mayor said the crude prices are likely to hover above the $90 per barrel mark.

"The war premium is 30 percent in crude prices today," the expert noted, adding that a positive outcome may emerge if the market gets a "better idea on how long the conflict may last or how soon it could unwind".

The prices, till a resolution of the Russia-Ukraine conflict is reached, will remain high as Russian productions account for nearly $3 million barrel of daily supply. "There is no easy substitute for that," she pointed out.

According to Mayor, the surge in crude prices may accelerate the pace for the adoption of renewable energy. This is an opportunity for several countries, including India, to reduce their dependence on oil.

"India should reduce the reliance on crude, and make use of the abundant natural resources," Mayor said, adding the country should expand the electrification of transport and the use of hydrogen as a source of energy.