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In a signal that economic recovery globally would be sustained post the fresh wave of Covid-19 infections, oil guzzling is expected to increase rapidly in the second half of the fiscal despite a rise in prices.

According to a report by ICICI Securities, Brent crude, which is up 4.3 times from the April, 2020 lows is expected to remain above $70 a barrel is most parts of FY22. This will largely be driven by demand recovery from the April 20 lows, announcement of high-efficacy vaccines, their rollout, and OPEC+ capping supply to ensure supply deficit.

Though resumption of Iranian oil supply in the global market is expected to disturb the equilibrium and may act as disruption for rising oil prices on the back of improved supplies, demand projections outweigh concerns on oil prices.

"2015 nuclear deal may be revived in Q3CY21, but Iran's exports may resume only in Q4. This means the rise in Iranian supply can be absorbed by further global demand recovery (Q4 demand 5m b/d higher than in Q2) as vaccines are rolled out," ICICI Securities said in its report.

Estimates for FY22 and FY23 for Brent based on futures is $71.8-68.2/bbl (US$68.3/bbl in FY22-till date). This clearly indicated that oil demand would remain robust holding up the prices for most part of this year and even next year.

The development brings good news for public sector oil explorers ONGC and Oil India as they could get better returns on the oil that they sell this year.

Brent plunged to $17.3/bbl in April,2020 as lockdowns hit demand. Demand recovery from April, 2020 lows, announcement of high-efficacy vaccines, their rollout, and OPEC+ capping supply to ensure supply deficit as demand recovery fumbled due to second wave in Europe helped drive 4.3-times surge in Brent from April lows to $75/bbl.