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The Crisil Research today said that it foresees the average price of Brent at $35 to 40 per barrel in 2020, with risks tilted to the downside. Crude oil output war between major producers and demand contraction following the Novel Coronavirus (Covid-19) pandemic have sent prices on a free fall.
Depressed prices will impact oil producers across the globe, while the demand slump is expected to affect the financials of oil marketing companies in India. The government will benefit by hiking taxes on oil, while consumers will enjoy some trickle-down benefit of lower fuel prices, the research firm said in an impact note.
The Crisil note said that oil prices collapsed on March 8 after Saudi Arabia announced a material increase in production to defend its market share. Prices had already plunged to $45 per barrel on March 6, as Russia broke ranks with the OPEC and allies, following differences over a cut in production during their meeting in Vienna. That triggered Saudi Arabia, the OPEC’s largest oil producer to announce a price war by offering enormous discounts of $ 6 to 8 per barrel on its April selling price.
The convergence of geopolitics, economic slowdown, and the Covid-19 pandemic should keep oil prices low for a long while. High-cost producers are in trouble, especially the shale gas industry in the United States (US),which went off rails similarly in 2014, the note said.
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