New Delhi: Crude oil prices are poised to end the month of April unchanged, following a remarkable 13% rally (Brent crude) seen during the first quarter of the calendar year 2024 (Q1CY24), on the back of OPEC cuts ( Source (about a third of the world’s oil), optimism regarding economic recovery, and conflict over energy infrastructure between Ukraine and Russia.
Prices stabilized in April on the back of easing tensions between Israel and Iran, an anticipated delay in US rate cuts and the possibility of a ceasefire in the Middle East, all of which contributed to a narrowing of the risk premium for crude oil.
According to recent media reports, US Secretary of State Antony Blinken is intensifying efforts to negotiate a ceasefire in Gaza. This development has helped ease market concerns regarding an increase in conflict in the Middle East.
So far, Brent crude futures in April have seen a marginal rise of 0.26%, while WTI crude futures have seen a marginal decline of 0.55%. Iran’s unprecedented attack on Israel in retaliation led to a sharp rise in crude oil prices in mid-April, reaching their highest level since October.
This was seen as a response to the suspected Israeli attack on the Iranian Consulate in Damascus, Syria earlier in the month. In response, Israel reportedly targeted three Iranian cities, although damage was limited.
Market tensions later subsided, as there was no immediate impact on oil production and attacks between the two countries also appeared to have subsided.
Additionally, major Middle Eastern countries avoided escalating the conflict, which limited trading in crude oil prices. Initially, analysts feared a strong Israeli retaliation against Iran. However, the United States and the European Union intervened, placating Israel by announcing a series of sanctions, including on Iran’s oil sector.
Additionally, recent media reports indicate that Russia continues to flood the markets with its cheap oil, maintaining multi-month high exports of seaborne crude. India and China remain the primary customers of Russian crude oil.
On the demand side, global economic uncertainties and concerns about prolonged high interest rates by the US Federal Reserve have contributed to the decline in crude oil prices this month. Additionally, high US raw material inventories have further depressed prices.
As we await the Federal Reserve’s interest rate decision on Wednesday, the focus remains on whether policymakers will keep borrowing costs at record levels, a move generally considered a negative for commodities. goes.
Investors will be closely watching Chair Powell’s comments for information on the timing and frequency of potential interest rate cuts this year, especially given current inflation pressures.
The last time the US central bank chair spoke, he indicated that policymakers were likely to keep borrowing costs higher for longer than before, which would help bring down inflation and provide lasting strength in the labor market. points to a lack of further progress towards.
In terms of economic indicators, expectations suggest a slowdown in non-farm payrolls growth to 210K in April from 303K in March. According to Trading Economics, the unemployment rate is projected to remain stable at 3.8%, with monthly wage growth expected to remain unchanged at 0.3%.
Crude oil price outlook
In its recent report, ICICI Global Markets revised its Brent crude price estimates for the second quarter of 2024, raising the range from $75/bbl to $85/bbl to $80/bbl to $90/bbl. This adjustment includes a potential geopolitical uncertainty premium that may persist.
The report suggests the possibility of a rise to $95/bbl in the near term. Overall, the average Brent crude price forecast for the year has increased from $80/bbl to $86/bbl due to the expected increased price profile throughout 2024.
“For 2025, relatively balanced physical markets could result in an unchanged flat trading profile of $80/bbl to $90/bbl. The downside risks to our projections remain,” the report said.
