With oil prices firming up on strong demand and and increased uncertainty in Syria following the US bombings, crude prices are expected to touch $60 a barrel levels in the coming months an analyst said on Monday.
As per available data, the Indian basket, comprising of 73 per cent sour-grade Dubai and Oman crudes, and the balance in sweet-grade Brent, closed trade last Friday at $54.19 for a barrel of 159 litres.
“We expect crude to touch $60 a barrel in a few months, not few weeks,” oil analyst Virendra Chauhan told BTVi in an interview.
“May, June, July, the US summer demand will be strong and we expect the price to move into the sixties,” he said.
According to the latest data from the Organisation of Petroleum Exporting Countries (OPEC), its reference basket of 13 crude oils closed at $52.91 a barrel on Friday.
Chauhan discounted the impact of the Syrian crisis on oil prices.
“Fundamentally, there is not a lot of impact from Syria, which has been producing close to zero (oil) in the last 4 years,” he said.
“Where there is potential impact is if regional players get sucked into the unrest, like Russia, Iran, Saudi Arabia,” he added.
Chauhan also said there is a limit to which increased US production could negate the effect of the cuts initiated by producers to tackle the supply glut and resultant falling prices.
“We expect the US rig count to grow, particularly in the Permian basin. The market, investors’ view on oil is that any cuts by OPEC, by non-OPEC… the gap will be filled by the US,” he said.
“Our view is that US production will not grow apace at a sustainable level to keep markets well supplied. Moreover, the impact that low prices have had on cutting back on investment in exploration infrastructure will take a long time to reverse,” he added.
Last November, major oil producers agreed to cut output as a response to the global supply glut that had been pushing down prices for nearly two years.
In early December, oil producers outside the OPEC, led by Russia, agreed to reduce output by 558,000 barrels per day (bpd). This came in the wake of the 13-nation OPEC cartel’s November 30 decision to cut output by 1.2 million bpd for six months effective from January 1.
This is the first time since 2001 that OPEC and some of its rivals had reached a deal to jointly reduce output to tackle the global oil glut.
Oil prices had earlier fallen by more than 50 per cent in less than two years, from levels of over $120 a barrel.