Brent May Continue to Remain Range-Bound with a Softer Bias
Brent is hovering around the US$ 70 level, and the broad range has been between US$ 70 to US$ 75 per barrel. This range has held quite well for more than three months, and it is less likely that this broad range may be breached on a sustainable basis. There were several factors which could have pushed the oil prices higher. The OPEC+ output restriction which has been in vogue for more than a year now has not helped the prices in any way. Probably it helped support the prices from moving lower. The war in Eastern Europe and the Middle East conflict also did not help oil prices much. The prognosis of imposition of more sanctions on Russia was considered a factor that could affect prices adversely. But none of these factors pulled oil prices out of the broad ranges within which it has been moving. The OPEC+ output restrictions have been partially lifted now with a 2.20 million barrel per day output cut that is planned to be withdrawn from April 25, and this could trigger a short to medium term downward bias in oil prices.
The US is more or less self-sufficient in its oil requirements, and the new dispensation has made it an important objective to attain complete energy sufficiency. The other factor which the new administration has focused on is energy affordability for the people. The process of seeking self-sufficiency is going to accelerate in the coming days, and this will keep prices in check. Any rise in oil prices may be possible if the US Dollar depreciates from the current levels in response to further Fed rate cuts. But the emerging supply-demand situation need not necessarily support this thesis. The lower demand from China due to a sluggish economy and weak consumer demand and the more extensive use of electric vehicles, coupled with a low single digit growth of global oil demand forecasts, would continue to put pressure on oil prices. At any point in time, any escalation of sanctions and conflicts with Iran either by the US or Israel could give some room for prices to edge higher. The broad range that was forecast in the last few monthly updates, US$ 75-US$ 80, remains modified to US$ 70 – US$ 75 per barrel, based on the new developments with respect to supply.
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