Oil markets are heating up, with Brent crude touching a five-week high of more than $94 a barrel as tensions between the US and Iran intensified, according to a report by the TOI Business Desk. On Wednesday, Brent crude was trading at around $94.12 per barrel, while crude oil (likely WTI) stood at around $87.38 per barrel. Analysts expect crude prices to remain broadly in the $90-100 per barrel range rather than staging a sustained climb towards $112.
Fundamental Driver: Geopolitical Tensions
The primary catalyst for the recent price surge is the heightened geopolitical risk between the US and Iran. According to Manoranjan Sharma, chief economist at Infomerics Valuation and Rating Limited, "oil markets are clearly reflecting heightened geopolitical risk, relatively tight OPEC+ supply and the possibility of further disruptions to global energy flows." However, Sharma noted that current prices do not indicate that markets are fully pricing in a major, structural supply shock.
Supply Side: OPEC+ and Potential Disruptions
Supply dynamics are largely driven by OPEC+ production restraint and the risk of disruptions in the Strait of Hormuz. Sharma stated that for oil prices to move towards $112 a barrel, a far more severe set of developments would be required, including a prolonged disruption in the Strait of Hormuz, additional production losses across the region, and a significant increase in speculative positioning. He characterized such an outcome as a "tail-risk scenario" rather than the most likely trajectory.
| Scenario | Price Range | Key Drivers |
|---|---|---|
| Base case | $90-100/barrel | Continued geopolitical risk, tight OPEC+ supply |
| Upside to $112 | Requires severe disruption | Strait of Hormuz closure, additional output losses, speculative surge |
Markets have become more cautious about extreme oil-price forecasts after earlier projections of $150-200 a barrel following the outbreak of war failed to materialize, Sharma pointed out. He added that a sustained move to $120 is not impossible but would probably require a fresh and significant escalation.
Demand Side: Inventory Data in Focus
On the demand side, investors are closely watching inventory data for near-term price direction. Deveya Gaglani, senior research analyst - commodities at 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 $90 mark." For domestic traders, Gaglani indicated that MCX crude oil has resistance at 8,400, while 8,000 remains the key support level to watch.
Price Outlook and Key Levels
With Brent crude currently near $94.12, analysts see limited upside to $112 without a major supply shock. The base case remains a $90-100 range. Key technical levels for NYMEX crude (WTI) are around $87.38, with a potential move to $90 if inventories drop. MCX crude support at 8,000 and resistance at 8,400 provide guidance for Indian traders. The next major data release is the crude oil inventory report, which could trigger near-term volatility.
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