Why Wood Mackenzie believes oil prices could ease by early FY25
Sushant Gupta, Director of Wood Mackenzie says the oil markets will be tight in the fourth quarter of the current financial year and expects Brent prices to average around $91-92/bbl.
Crude oil prices have increased by almost 6% since the onset of the Israel-Hamas conflict ten days ago. Analysts in the domestic market are currently adopting a cautious approach as any escalation in the conflict could have a substantial impact on the profit margins of industries reliant on oil, including automotive, aviation, and paint sectors, among others.
Speaking in an interview with CNBC-TV18, Sushant Gupta, Director of Wood Mackenzie said, “On the fundamental side, we still remain of the view that the markets will be tight in the quarter four (Q4FY24), and we continue to expect prices to be around $91-92/bbl for Q4 average for Brent.”
However, as we move into the first quarter of the next fiscal year (FY25), it is expected that oil prices will undergo a slight reduction due to the seasonal stock build anticipated for Q1 next year. Consequently, the market is likely to experience a mild easing in the initial quarter of the coming year.
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Nevertheless, in our current projections, we anticipate that the supply from Venezuela and Iran will continue to increase, albeit not to the same degree as one might anticipate – rather, we expect a modest uptick in supply.
Earlier this week, Peter McGuire, CEO of XM Australia said he believes there exists a potential for crude oil prices to skyrocket to the $100 per barrel mark.
The Middle East is responsible for roughly 30% of the global oil production.
Potential effects of increasing oil prices on enterprises
According to a report issued on October 9 by Axis Capital, the surge in oil prices is expected to have a severe impact, primarily affecting oil marketing firms.
The gross marketing margin for auto fuels has experienced a significant decline, plummeting from a robust Rs 10.2 per litre in the first quarter of FY24 to Rs 2.1 per litre in the second quarter and further to Rs 0.8 per litre on an immediate basis.
Axis Capital anticipates that this development will have a detrimental effect on the earnings of oil marketing companies in the latter part of the current fiscal year.
For more details, watch the accompanying video
(Edited by : Shweta Mungre)
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