Vineeta Sharma of Narnolia Financial Advisors said sanction on Iran and strong seasonal demand in October will too impact crude prices in the near term.
Narnolia Financial Advisors
For last few days Brent is trading firmly above $80 per barrel. India being a large importer of crude, our macroeconomic parameters depends a lot on how crude is behaving. In June this year when full OPEC members meeting had taken place in Vienna there was a sense that OPEC led by Saudi Arabia is looking forward to Brent in the range of $65 per barrel and not $75 per barrel.
While the Vienna meeting was happening and crude had raised, Saudi minister had warned traders saying the resolve of the OPEC members to keep crude prices benign should not be undermined by the traders. But a lot has changed over the last three months.
During last weekend meeting in Algiers, OPEC member along with Russia had reiterated that they would be raising the production to compensate for the supply loss by any of the OPEC members. They still remain committed to original 1.8 mbpd-2 mbpd (million barrels per day) cut envisaged in December 2016.
Saudi Arabia had insisted on having the capacity of 1.5 mbpd to meet the shortages in the global oil market. Russia too expressed intentions for a gradual rise in production to meet the shortages, if any.
But what has changed is the firmness on price- Saudi’s Falih has said that "I do not influence prices" in response to Trump’s calls for increasing production to cool off the prices. It suggests that the oil-producing countries are fine with the current crude at $80 a barrel.
If the above suggestion is true then $80 a barrel should be new normal for global oil markets at least till full OPEC member meeting in December. Sanction on Iran and strong seasonal demand in October will too impact crude prices in the near term.Disclaimer: The author is Head of Research of Narnolia Financial Advisors. The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.