Brent Set to Stay Range-bound

Brent is in a narrow range, and it is set to go nowhere at least for the immediate future. The one distinguishing feature of the recent past is that there is very little to push the prices and equally so to take it lower. The major challenge to rising prices was the rising number of cases in the third wave of the pandemic in different parts of the world. This was expected to dampen the demand for oil and cripple the prices. The US was affected by a surge in the number of cases with the new variants accounting for a larger share of the cases. In China too the pick-up in the number of cases baffled everyone. But due to the localized lockdowns in more than a hundred locations where infections were springing up the effective spread has been arrested. Since April to July this year the import of oil by China started slowing down as the concerns on account of the clouds of the third wave gathered in the horizon. The experience so far is
that the third wave is not as strong as expected by many. The agreement among OPEC+ for enhancing supply by 400,000 barrels per day still remains intact, and this may have a moderating influence on the prices. In addition to all these developments, what gives some push to the oil economy is the faster than expected economic growth in the US and Europe. Growth is going to put more people in jobs, and therefore, more spending on goods and services, even including travel and leisure. As indicated in our earlier updates, Brent which is currently at US$ 73, may find good support at the US$ 68 to US$ 70 levels in the immediate term. While much would depend on the direction of the US Dollar, and the strength of the recovery in the US, China and India, there are no major triggers that may swing the prices too much either way. There is another interesting development by way of a focus on the disadvantages of electric vehicles recently – like the huge outlays on public charging points and stations, the possibility of hacking of such facilities resulting in corrupting the car or vehicle systems resulting in control and surveillance of vehicles by hackers, the need to have regulatory systems to keep track of utilization, billing etc. While
most of these things are in the realm of administrative matters and to some extent technical, before introduction of electric vehicles on a massive scale governments and public authorities may take the necessary steps to counter any negative developments that may stunt the prospects of energy efficiency


Leave a Reply