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With Brent crude surging to USD 94 a barrel, analysts expect prices to remain broadly in the USD 90-100 range, with geopolitical developments likely to trigger intermittent spikes rather than a sustained rise towards USD 112.
Crude oil prices surged to hit a five-week high on Wednesday with Brent crude hitting USD 94 per barrel amid intensifying tensions between US and Iran. At the time of reporting, Brent crude was trading at around USD 94.12 per barrel and crude oil was trading at around USD 87.38 per barrel. Manoranjan Sharma, Chief Economist, Infomerics Valuation and Rating Limited noted, "oil markets are clearly reflecting heightened geopolitical risk, relatively tight OPEC+ supply and the possibility of further disruptions to global energy flows. Yet current prices do not indicate that markets are fully pricing in a major, structural supply shock." As per the economist, a price move towards USD 112 would probably require a more severe combination of factors, including a prolonged disruption in the Strait of Hormuz, further production losses in the region and a substantial increase in speculative positioning. "While such an outcome cannot be ruled out amid continuing geopolitical tensions, it currently appears to be a tail-risk scenario rather than the most likely trajectory for oil prices," he said. Sharma noted, "Markets have also become more cautious about extreme oil-price forecasts. Earlier projections of USD 150-200 a barrel following the outbreak of war failed to materialise, suggesting that investors are already factoring in a substantial geopolitical risk premium. A sustained move to USD 120 is, therefore, not impossible, but it would probably require a fresh and significant escalation." At the same time, Deveya Gaglani, Senior Research Analyst - Commodities, Axis Direct said, "Investors are closely monitoring crude oil inventory data due this evening; any unexpected drop in inventories could push NYMEX prices toward the USD 90 mark." According to Galani, MCX crude oil faces resistance at 8,400, while 8,000 is a key support level to watch. (ANI)
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