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Time of India
21 hours ago
- Business
- Time of India
icra: 4 reasons why crude oil is not likely to sustain $80/bbl. How is India impacted?
Here are 4 reasons why Brent may sustain $80 per bbl: 1) Iran's Strait of Hormuz gamble too costly to close ADVERTISEMENT 2) OPEC production 3) US Shale factor ADVERTISEMENT 4) Global oil demand growth projections ADVERTISEMENT Impact on India 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 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 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 has wielded the threat of disruption as a geopolitical bargaining tool, without crossing the line into direct confrontation, Yes 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 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 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 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 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 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.
Time of India
a day ago
- Business
- Time of India
Global oil supply: Iran may use threat of closing Strait of Hormuz as leverage only; analysts say markets remain in surplus
Representative image Iran has repeatedly warned of blocking the Strait of Hormuz, a narrow yet strategically crucial maritime chokepoint for global oil supply, however, the country has not yet shut it down. Analysts say that the vital passage has never been shut down and Iran is using this threat as a diplomatic lever and that the chances of an actual shutdown are slim. Additionally, global oil markets are also well prepared to absorb any geopolitical shock from the region. "Iran has threatened to close the Strait of Hormuz numerous times in the past but has never followed through, as doing so would be strategically and economically self-defeating," said Hitesh Jain, strategist for institutional equities research at Yes Securities. The Strait, which lies between Iran and the Arabian Peninsula, is the main passage for oil exports from Saudi Arabia, Iran, Iraq, Kuwait and the UAE. It also serves as a key route for liquefied natural gas (LNG) shipments from Qatar. Roughly 20% or one fifth of global oil and a significant share of global LNG passes through this narrow waterway. Over a third of India's energy needs also travel through the passage. Jain noted that oil markets remain well-supplied, pointing to OPEC's spare capacity of 4 million barrels per day and a pre-conflict global surplus of 0.9 million bpd as key buffers. The growing strength of US shale production, he added, further boosted the market's resilience. Rating agency ICRA echoed the sentiment but added a note of caution, suggesting that crude prices may average to $70-80 per barrel for the current fiscal year. 'A sustained flare-up in the conflict poses upside risks for our estimates of crude oil prices, and consequently of net oil imports and the current account deficit (CAD). A $10 per barrel increase in the average price of crude oil for the fiscal will typically push up net oil imports by $13-14 billion during the year, enlarging the CAD by 0.3 per cent of GDP.' India is heavily reliant on imported energy, with over 85% of its crude oil and around half of its natural gas needs coming from abroad, PTI reported. Imports from Iraq, Saudi Arabia, Kuwait and the UAE, most of which pass through the Strait, account for 40–45% of India's oil supply. Roughly 60% of its LNG imports also transit through the same channel. Jain added that the global energy landscape has evolved significantly. Since 2008, the rise of US shale has enhanced global supply and flexibility, allowing markets to absorb geopolitical shocks with only short-lived price spikes. Meanwhile, OPEC's reduced market share and increased spare capacity, largely from Saudi Arabia and the UAE—have helped keep volatility in check. On the demand side, China's weak post-COVID recovery and the global shift towards electric vehicles (EVs), improved fuel efficiency, and greener policies are slowing oil demand in OECD countries. 'Given this backdrop, Brent crude is unlikely to sustain levels above $80 per barrel in a durable way unless the Strait of Hormuz is closed, or critical Gulf infrastructure is targeted,' Jain noted. The International Energy Agency (IEA) and US Energy Information Administration (EIA) have both trimmed their 2025 global oil demand growth forecastsby 0.2-0.28 million barrels per day. Still, ICRA cautioned that regional risks remain. Iran currently produces about 3.3 million barrels of crude oil per day, of which 1.8–2.0 million bpd is exported. 'While Iranian oil and gas facilities have reportedly been attacked, the extent of damage is not clear. However, any disruption of Iranian production and supplies or a wider regional conflict impacting other large producers in the region could push energy prices higher. ' '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' the rating agency added. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Economic Times
a day ago
- Business
- Economic Times
4 reasons why crude oil is not likely to sustain $80/bbl. How is India impacted?
Crude oil may not sustain above $80/bbl despite Middle East tensions, say brokerages, citing factors like OPEC's spare capacity, stable US shale output, and weak global demand. For India, a $10/bbl price rise could inflate oil imports by $13–14 billion, hitting downstream margins and LPG subsidy costs. 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 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 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 has wielded the threat of disruption as a geopolitical bargaining tool, without crossing the line into direct confrontation, Yes 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 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 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 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 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 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.
Time of India
a day ago
- Business
- Time of India
4 reasons why crude oil is not likely to sustain $80/bbl. How is India impacted?
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. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like 23.7% Returns in last 5 years with Shriram Life's ULIP Shriram Life Insurance Undo ICRA too expects crude prices to average between $70-80/bbl for FY2026. Here are 4 reasons why Brent may sustain $80 per bbl: 1) Iran's Strait of Hormuz gamble too costly to close 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. Live Events Tehran has wielded the threat of disruption as a geopolitical bargaining tool, without crossing the line into direct confrontation, Yes noted. 2) OPEC production 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. 3) US Shale factor 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. 4) Global oil demand growth projections 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. Impact on India 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.
Time of India
a day ago
- Business
- Time of India
Despite threats, Iran never closed Strait of Hormuz; oil mkt well-supplied: Analysts
Strait of Hormuz - the narrow but strategically vital waterway through a fifth of world's oil and gas transits and is supply lane for more than a third of India's energy need - has never been shut and Iran has used shutdown threats as a diplomatic lever, analysts said. Oil markets, they said, are well supplied, posing no threat to the world energy order. The Strait of Hormuz, which lies between Iran to the north and Oman and the United Arab Emirates to the south, serves as the main route for oil exports from Saudi Arabia, Iran, Iraq, Kuwait, and the UAE. Many liquefied natural gas (LNG) shipments, especially from Qatar, also pass through the strait. "Despite repeated threats, Iran has never closed the Strait of Hormuz due to the strategic and economic costs. The strait is essential for global energy flows, handling 20 per cent of oil trade and major LNG exports, and vital to Iran's own economy and its regional allies," said Hitesh Jain, Strategist, Institutional Equities Research at Yes Securities . Instead, Tehran uses the threat as a diplomatic lever. Icra said any escalation in the conflict in the area could significantly impact global supplies and prices. Jain said oil markets appear well-supplied, with OPEC's 4 million barrels per day spare capacity and a pre-conflict global surplus of 0.9 million bpd providing a buffer. The rise of US shale adds further resilience. On the demand side, China's weak recovery and the structural shift toward EVs are softening growth projections. "Given this backdrop, Brent crude is unlikely to sustain levels above USD 80 per barrel in a durable way unless the Strait of Hormuz is closed, or critical Gulf infrastructure is targeted," he said. Icra projected crude prices to average between USD 70-80 per barrel for the current fiscal. "A sustained flare-up in the conflict poses upside risks for our estimates of crude oil prices, and consequently of net oil imports and the current account deficit (CAD). A USD 10 per barrel increase in the average price of crude oil for the fiscal will typically push up net oil imports by USD 13-14 billion during the year, enlarging the CAD by 0.3 per cent of GDP." India imports more than 85 per cent of its oil needs and about half of its gas requirement. "Iran has threatened to close the Strait of Hormuz numerous times in the past but has never followed through, as doing so would be strategically and economically self-defeating," Jain said. "The strait is vital as about 20 per cent of global oil and key LNG exports, especially from Qatar, transit through it. A real closure would provoke retaliation from US Naval Forces in the Persian Gulf, harm Iran's own oil exports and imports, and undermine its diplomatic standing. Consequently, Tehran continues to use the threat as a bargaining tool without disrupting actual supplies." The Strait of Hormuz remains open despite threats, and additional buffers like US strategic reserves and flexible shale output further support market stability. "Hence, oil markets are unlikely to face a sustained supply shock," he said. Since 2008, US shale has boosted global supply and flexibility, helping markets absorb geopolitical shocks with only brief price spikes. OPEC's reduced market share and higher spare capacity, mainly from Saudi Arabia and the UAE, have further limited volatility. This dynamic has kept oil prices more range-bound, with US shale acting as a soft ceiling on prices. On the demand side, China's post-COVID recovery remains weak due to economic restructuring and a sluggish property sector. Meanwhile, long-term trends like EV adoption, better fuel efficiency, and green policies are slowing demand growth in OECD nations. Reflecting a more tempered consumption outlook, the IEA and EIA have both cut their 2025 global oil demand forecasts by 0.2-0.28 million barrels per day. Icra said Iran's crude oil production is around 3.3 million bpd, of which it exports 1.8-2.0 million bpd. "While Iranian oil and gas facilities have reportedly been attacked, the extent of damage is not clear. However, any disruption of Iranian production and supplies or a wider regional conflict impacting other large producers in the region could push energy prices higher." Crude oil imports from Iraq, Saudi Arabia, Kuwait and the UAE that pass through the Strait of Hormuz account for around 40-45 per cent of total crude imports by India. About 60 per cent of the natural gas imports by India pass through the Strait. "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," Icra added. PTI
