Over the past month, there has been a two percent increase in the price of crude oil globally in response to heightened geopolitical concerns. In reaction to what seemed to be an increase in hostilities between Israel and Iran, the price of Brent crude crossed the $90/barrel threshold. In the short term, crude prices are expected to trade in accordance with the upward tendency that is emerging from geopolitical tensions, according to a research published by ICICI Bank Research.
"We increase our range to $85/bbl in Q22024 from $75/bbl to $90/bbl in order to account for the potential persistence of the geopolitical uncertainty premium. In the near future, there is a chance of an overshoot to $95/bbl, according to ICICI Bank."
Tensions in geopolitics that led to the rise in crude oil In response to a purported Israeli attack on the Iranian Consulate in Damascus, Syria on April 1, 2024, Iran fired more than 300 projectiles—about 170 drones and more than 120 ballistic missiles—against Israel on April 15.
The war between the two nations entered a potentially explosive new phase as a result of this attack. 99 percent of these missiles were intercepted, according to the Israel Defence Forces (IDF), with assistance from Saudi Arabia, Jordan, the United Kingdom, and the United States of America.Israel seems to have struck three Iranian cities in reprisal, however the damage was not great.
Since there was no immediate impact on oil production from the countries ceasing their strikes, market tensions have subsided. Furthermore, it doesn't seem like any of the main Middle Eastern nations want to get involved in the battle. Since the worst-case scenario looks to have been averted for the time being, the net effect of pushing Brent crude prices has lessened. Attacks by Ukraine on Russian oil refineries are still a cause for concern.
Since January, the Ukrainian armed forces launched 23 attacks. These attacks have disrupted at least 15 per cent of the oil refining capacity in Russia so far. Russia has been able to quickly repair some of its refineries reducing capacity idled by the Ukrainian attacks down to 10 per cent from almost 14 per cent at the end of the March.
Russian primary oil refining capacity, idled by drones, was reduced to 90,500 metrictons per day from around 123,800tons per day (907,000 bpd) previously.Russian refinery outages added to the unease ensuring that Brent crude prices trade above the $85/bbl mark.‘’It remains to be seen whether Russian exports drop-off that could have a much severe effect on the demand-supply imbalances,'' according to economists at ICICI Bank
The Ukrainian armed forces have carried out 23 assaults since January. Thus far, at least 15% of Russia's oil refining capacity has been affected by these attacks. Due to Russia's prompt maintenance of some of its refineries, the capacity that was idled at the end of March due to the Ukrainian attacks was reduced from nearly 14% to 10%. Drones caused the
Russian primary oil refining capacity to decrease from around 123,800 tonnes per day (907,000 bpd) to 90,500 metric tonnes per day.Outages at Russian refineries contributed to the anxiety, guaranteeing that Brent crude prices remain over $85/bbl.Economists from ICICI Bank state that it is unclear if Russian exports will decline, which might have a significant impact on supply and demand imbalances.
Outlook for global crude prices
The average prediction for Brent
Crude prices over 2024 has increased from $80/barrel to $86/barrel overall due to the higher profile of prices anticipated during that period. A very balanced physical market could lead to a flat trading profile that stays at $80–$90 per barrel in 2025. There are still upside risks to our predictions, according to ICICI Bank.
