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Crude oil price likely to touch $80 per barrel this fiscal, says report

Brent crude oil prices are expected to test $80 a barrel this fiscal, according to a study by Emkay Wealth Management. A firm dollar against other major currencies, however, will help keep the upside in check. A stronger greenback makes oil, priced in dollars, more expensive in other currencies, weighing on demand.

On Thursday, a strong US dollar pulled down oil prices even as a drop in inventories cushioned the downside. Brent crude oil futures dropped 33 cents, or 0.4%, to $74.06 a barrel. They had hit their highest since April 2019 in the previous session.

U.S. crude oil futures eased 28 cents, or 0.3%, to $71.87 a barrel, after reaching their highest since October 2018 the previous day.

Talks of a possible nuclear deal have dominated global oil markets and also hopes of better relations between the two countries.

“This would mean that the supply from Iran will be in the markets as soon as such a pact is reached. Therefore, the prices should naturally come down. But there is a strong view that oil prices may start going up, anticipating this supply in the near future,” said Emkay in a report.

The recent rise in global oil prices is seasonal in nature, with a number of people taking to the highways to head to holiday destinations immediately after the summer in northern hemisphere.

Moreover, the recovery in economic activity in the US and Europe is on course, and is also true for leading Asian countries. This will support higher oil prices though demand in Asia is yet to go back to the pre-pandemic levels. Production in the US, which was at 13 million barrels per day just before the pandemic, touched almost 11 million barrels per day recently. Therefore, restoration of supply, as well as demand, is on track.

Overall economic conditions warrant higher consumption and therefore, higher prices. Again, much would depend on the stance taken by OPEC+ which may be meeting soon. Russia is now in sync with OPEC in achieving the production cuts which OPEC had envisioned earlier.

A related matter is the enhanced climate activism seen in recent past and likely attempts at containment of carbon emissions by oil companies and producers. It is gathering pace and it is good for the environment and the posterity, the report said, adding that the extent to which renewable energy or electricity could replace the traditional sources is limited in the initial stages, and in fact, many believe that the common man may not be able to afford costs associated with electric vehicles.
Source: Live Mint

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