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Crude to be around $60 a barrel in 2021
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SME Times News Bureau | 17 Apr, 2021
Global crude oil prices are expected to be in the range of $60 a barrel
over the long term period as OPEC+ decision to cap supply until demand
recovers and the pandemic continuing to keep a check on consumption. According
to a research report by ICICI Securities, Brent has recovered and is
over $ 60/bbl since February, 21 vs April, 20 low of $ 21/bbl driven by
demand recovery from lows and OPEC+ capping supply to ensure supply
deficit since July last year.
"OPEC+ capping supply until demand
recovers is estimated to ensure supply deficit of 1.3 million barrels of
oil per day in calendar year 2021 and keep Brent above $60/bbl," the
brokerage said.
The expectation for the crude was that it may
surge in 2021 on the back of economies recovering as vaccinations tamed
the spread of Covid-19. But the lockdowns again due to fresh surge in
Covid cases has delayed demand recovery in Europe.
Also, the
probability of US sanctions on Iran's oil exports being lifted appears
to have increased substantially. EU and other signatories to the nuclear
deal are talking to Iran and US separately to bring them on the same
page and revive the deal. Indications are that US sanctions on Iran
exports may be lifted as early as before Iran's presidential elections
due on June 18.
"While OPEC+ capping supply should keep Brent
above $ 60/bbl, delay in demand recovery and US lifting sanctions on
Iran exports would cap further rise. We estimate long-term Brent at
$60/bbl," ICICI Securities said.
With regard to gross refining
magind (GRMs) the outlook is modest as capacity addition is expected to
exceed to refined products demand growth. Besides, hit to demand from
Covid worsened the outlook. Before the Covid hit, BP Plc estimated that
global liquids demand would rise by 10m b/d, but demand for refined
products would grow by just 3m b/d by CY40. 9m b/d of refining capacity
is under construction or planned mainly in China, India and Middle East.
Rising
US and China petroleum product exports, which has hurt GRM in the past,
would continue to hurt GRM in the future, too. US shale revolution,
which has led to WTI prices being at significant discount to Brent and
Dubai, has made US refineries very competitive and made the US a net
exporter of petroleum products since CY11.
China's auto fuel
exports have been up YoY in the last seven years. Quest to reduce its
petrochemical imports has led to China building large
refining-cum-petrochemical complexes.
With IEA estimating
global refined products demand recovering to above pre-Covid levels in
CY23E, hit to demand from Covid appears to have worsened the outlook for
GRM, the report said.
However, vaccine-driven recovery in global
oil demand and permanent closure of refineries is estimated to boost
global refinery utilisation to 77.8 per cent in CY21E from 37-year low
of 72.5 per cent in CY20E.
Estimate suggest that global refinery
utilisation to gradually rise from 79.1 per cent in CY22E to 80 per
cent in CY26E. IEA estimates permanent closure of 3.6m b/d of refining
capacity, but believes 6m b/d is required to ensure global refinery
utilisation is sustainably above 80 per cent.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
|
64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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