Iran crisis could send crude soaring: Macquarie's Jal Irani
Saturday, 25 February 2012 | 00:00
The increasing isolation of Iran on the global scene could send crude oil prices soaring, feels Jal Irani, Managing Director - Oil & Gas Research, Macquarie Group.
"We see a material upside risk to crude prices because of Iran," he told CNBC-TV18 in an interview. Macquarie estimates that roughly 2.5 million barrels (oil) per day is at risk because of the festering tension in the Middle East triggered by Iran's belligerence regarding its nuclear policy.
Irani feels the Organisation of Petroleum Exporting Countries (OPEC) will find it difficult to match this shortfall, says Irani. Already, many countries have already stopped importing oil from Iran, while some others, India include, have reduced their purchases from Iran.
"Even if OPEC matches supply (of 2.5 mbpd), further headroom will be low... a (potential) war in Iran could lead to a significant oil shock," he says.
At the current price of around USD 123 per barrel, crude prices have risen 15% in the last couple of months (45% over the last one year) since the problem over Iran's nuclear stance surfaced. The high crude oil prices have severe implications for countries like India which are heavy importers of oil.
Already in the first nine months of the current financial year (April-December), India's oil import bill has risen nearly 40% to USD 106 billion, and accounts for nearly 80% of the trade deficit. The problem comes at a time when the government is trying hard to control the widening current account deficit which is putting pressure on the rupee.
Among the plays on the oil sector, Irani is bullish on BPCL and ONGC .
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