Oil prices are unlikely to fall dramatically to the levels seen in 2015-16, which benefited India immensely, as uncertainties around US tariffs are likely to clear in two-three months, and producers may resort to supply cuts to arrest a free fall in prices, said the finance chief of Bharat Petroleum Corporation Limited (BPCL).
These are “good times” for oil marketing companies, BPCL director-finance Vetsa Ramakrishna Gupta told ET in an interview, referring to the large cash generation and margin boost that lower crude prices bring.
Despite US sanctions, Russian oil is “still more commercially viable” than others, and BPCL is facing no issue in sourcing it or paying for it, he said. Oil prices are likely to stay in the $60-65 per barrel range for the next two-three months and may inch to the $65-70 range after the tariff uncertainties fade, Gupta said.
The baseline tariff issue between the US and major countries is likely to be resolved during this period, he said. Recent tariff declarations of more than 100% by the US and China on each other’s goods are just “tactical moves” ahead of negotiations, Gupta said. “Without US, China cannot survive. Without China, the US cannot survive,” he said, adding that the two countries will have to strike a deal.
The current uncertainties are “sufficient” to disturb demand, which is weighing on oil prices, Gupta said. He, however, ruled out a repeat of the price crash witnessed in the past decade when crude prices plunged to below $30 in early 2016 from above $100 per barrel in the middle of 2014, benefitting Indian refiners, consumers and the government handsomely. Benchmark Brent averaged $44 in 2016, down from $52 per barrel in 2015.
“I don’t think the price will fall down drastically. If prices fall to $50-55 level, automatically production cuts will happen,” Gupta said, adding that producer cartel OPEC will be the first to cut supplies.
