Daijiworld Media Network - New Delhi
New Delhi, Sep 28: Brent crude prices are likely to remain elevated through the second half of FY27 and could climb to $120 per barrel if geopolitical tensions in West Asia intensify, posing significant upside risks to global energy markets, according to a Brickwork Ratings report released on Monday.
In its base-case scenario, which carries a 55 per cent probability, Brickwork Ratings expects Brent crude to average between $95 and $110 per barrel in the second half of FY27. The scenario assumes that disruptions in the region continue, while pipeline and shipping operations recover only partially.
“Brent futures rose about 20 per cent in a month to around $109 on September 15, while physical Brent reached $130.80, indicating tight supply,” said Rajeev Sharan, Head of Research at Brickwork Ratings.
Sharan said Brent is likely to trade in a broad range of $100-$110 per barrel over the next one to two months, although risks remain tilted towards higher prices.
“Prices could climb towards $120 a barrel if supply disruptions intensify, while a reopening of the Strait of Hormuz could ease prices towards $90 a barrel,” he said.
The report also estimated the Indian rupee to trade at Rs 94-98 against the US dollar under its base case, while projecting CPI inflation at 5-5.5 per cent and real GDP growth for FY27 at 6.6-7 per cent.
Brickwork Ratings said a sustained $10 increase in crude oil prices could widen India's current account deficit by 0.3-0.4 per cent of GDP and add 20-30 basis points to inflation over a one-year period.
Under its downside scenario, which carries a 30 per cent probability, prolonged disruption in the Strait of Hormuz and attacks on energy infrastructure in the Gulf could push Brent crude to $120 per barrel or higher.
Such a scenario could intensify inflationary pressures, weaken the rupee and slow economic growth, the report said.
In contrast, Brickwork Ratings' upside scenario, assigned a 15 per cent probability, assumes a durable ceasefire in West Asia and restoration of Saudi export routes. Under this scenario, Brent could decline to $80-$90 per barrel, easing cost pressures for oil marketing companies, airlines and chemical producers.
The lower crude prices could also create greater room for monetary easing in FY28, according to the report.