Global crude oil prices may hit $120/barrel in short term, $150 if gulf war extends over a month: Kotak’s Chainwala

NEW DELHI: Global crude oil prices could rise to $120 per barrel in the short term and potentially reach $150 per barrel if war extends over a month and geopolitical tensions continue in West Asia, Kayanat Chainwala, Assistant Vice President, Kotak Securities, said on Saturday.

“Near-term crude prices are likely to move in the $85-120 range for WTI and $90-125 for Brent. If the conflict escalates and supply disruptions persist for several weeks, prices could rise even further, possibly approaching $150 per barrel. But in the short term, $120 is more likely”, Chainwala said, emphasizing the role of supply disruptions in pushing crude markets higher.

She explained that the ongoing turbulence in the Strait of Hormuz and the state of Hormuz situation has already caused losses of approximately 10-12 million barrels per day. “This is a significant disruption, not a perceived risk. Earlier this year, the market was facing a glut of 4-5 million barrels per day, but the current losses are offsetting that surplus and pushing the market toward a deficit”, she said.

Chainwala added that emergency reserves, including the International Energy Agency’s 400-million-barrel release, would only cover about 20 days of lost supply, which would be insufficient if the disruption continues for an extended period. “Any prolonged disruption through this trade will be bullish for crude oil and negative for other commodities, as it ignites inflation concerns and could delay interest rate cuts”, she noted.

She also addressed potential price corrections. “If the situation de-escalates, the geopolitical premium built into oil prices would vanish. Prices could fall sharply to $55-65 per barrel. Before the disruption, oil markets were already bearish due to macroeconomic concerns and a supply glut,” she said.

On regional flows, she said the Strait of Hormuz is currently allowing only limited passage. “Very few barrels are passing through Hormuz — around 2-3 million barrels per day, compared to normal flows of about 20 million barrels per day. Certain countries are receiving preferential access, but overall, the route remains highly restricted”, Chainwala added.

She also discussed demand-side factors, highlighting that China, a major importer of crude, has set a modest growth target of 4.5-5 per cent this year with no major stimulus, which may limit sustained price pressure. Seasonal demand during travel months in May and June may have some impact, but other factors are unlikely to hold crude prices at elevated levels for long.

Regarding the domestic market, Chainwala said, “On MCX, crude prices could rise 20-30 percent from current levels of around Rs 8,300, reaching Rs 10,500-11,000, depending on how long the disruption continues.”

She concluded by warning that prolonged conflict or significant escalation could push prices even further, but if negotiations or minor attacks continue without major disruption, the crude market is expected to remain volatile yet within a $85-120 range. (ANI)