The US-China trade war and the growth of American oil supply will keep crude prices in check, notwithstanding West Asia tensions, according to Mukesh Kumar Surana, the Chairman and MD of Hindustan Petroleum.

Brent crude will likely remain in a range of $60 to $70 a barrel and could fall toward $60 if demand worsens, said Surana. The global benchmark was trading at around $63 a barrel on Monday. Oil-producing countries have to ensure that crude remains relevant, he said in an interview. So the prices have to be kept in a reasonable range.

Brent has fallen around 15 per cent from a high in late-April amid a deterioration in the global economy, with the International Energy Agency cutting its 2019 forecast for worldwide oil-demand growth for a second month in June. Rising tension in the Persian Gulf has only given prices a relatively small boost as supply, particularly from North American shale, remains ample.

The US is growing faster as an oil producer than a consumer, which is adding a new dimension to the market and eroding the dominance of the West Asian producers, Surana said. India imported 84 per cent of its crude in the last financial year, according to government data, and two of every three of those barrels was sourced from the West Asia.

Indian refineries started buying American oil after the US reversed a decades-old law that restricted exports of unrefined crude in late 2015. Some infrastructure constraints in the US Permian Basin are likely to be removed later this year, which will increase supply and may result in India being able to reduce its reliance on the West Asia, Surana said.

Hindustan Petroleum is expanding and modernising its refineries to give it greater flexibility to process more varieties of crude in the next couple of years and is also planning a new plant in north India, he said. This will mean the company can reduce its purchases of petroleum products from other refiners, Surana said.

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