Brent may remain subdued, most likely in a range of US$75 to US$80 per barrel. In the immediate term this range -bound movement is influenced by two factors. The first is that the premium which was sought to be built into oil prices is gradually waning due to the probability of a full-scale war diminishing in the Middle East. The general expectation is that some kind of truce will be hammered out in the not-so-distant future with the focus mainly on the release of the hostages and a ceasefire in Gaza. The probability is perceived to be high as far as this position is concerned.
A second and a more economical factor is the lack of pick up in Chinese demand for oil due to the still lingering growth concerns. Growth has set in, but it is not supported by strong overall demand which is lacking at this juncture. This is against expectations of China stacking up more oil in reserves to tackle any future impact of rise in oil prices.
Apart from the above, an interesting news is that China has unveiled its plans to build 11 new nuclear
reactors over the next seven years. This will ensure that China tides over its energy requirements through this one mode itself to a significant extent. This also highlights the importance which China places on its future energy security. China already has 26 functional nuclear reactors, and the addition of new reactors will help reduce the reliance on coal-based reactors which are responsible for air pollution in many provinces.
The speculations of a slowdown in the US as also some of the shadow economies has also dented the capacity of the prices to move up and sustain at higher levels. A cut in US rates and the consequent weak US currency may give some support to relatively higher oil prices. However, if demand factors weigh down the prices, favourable currency movements may not be able to push the fortunes much higher than the levels witnessed in the last three months.
