Oil prices may rise to govt’s comfort limit; volatility may remain high in first half of 2020
The oil prices are expected to remain highly volatile in the first half of 2020, largely in the band of $60-70 per bbl, a report said. The volatility is expected to be driven by higher demand for low sulphur crude as a result of IMO regulations on the usage of marine fuel coming into effect from January 1, 2020, Kotak’s Annual Outlook 2020 said. The Brent crude is likely to be largely in the band of $60-70/bbl, the report said, adding that in the first 1-2 quarters it may be closer to the higher end of the band. “There is likely to be a wider gap between light and heavy crude oil,” the report noted. Former finance secretary Subhash Chandra Garg recently said that oil at $70 per barrel is the comfort level for the government.
The oil demand may face downward risk owing to the global GDP while re-emergence of geopolitical risks and rhetoric ahead of the US Presidential elections can bring in volatility in the oil market, the report also said. “OPEC, in its Dec 2019 meeting, decided to deepen its production cut by 0.5 mn bdp but only upto Mar 2020. OPEC’s action on production – whether it gets extended timeline beyond Mar 2020 or gets rolled back partially, will be a key event to watch out for which will have a bearing on the oil price for second half of the year,” Kotak report also said.
