Oil prices to remain around $70-75 per barrel, says Emkay

Oil prices edged higher on Wednesday, supported by a weaker dollar, though concerns over a potential U.S. economic slowdown and the impact of global trade tariffs limited gains. Emkay noted that Brent crude futures rose by 13 cents, or 0.2 percent, to USD 69.69 per barrel as of 0730 GMT, while U.S. West Texas Intermediate (WTI) crude futures also gained 13 cents, or 0.2 percent, to USD 66.38 per barrel. Despite economic uncertainties, oil prices have held steady within a defined range.

According to Emkay, Brent crude has been fluctuating between USD 70 and USD 75 per barrel for over three months, with little indication of a sustained breakout.

“The broad range that was forecast in the last few monthly updates, US$ 75-US$ 80, remains modified to US$ 70 – US$ 75 per barrel, based on the new developments with respect to supply,” it said.

Emkay noted that while several factors, including OPEC+ output restrictions and geopolitical conflicts in Eastern Europe and the Middle East, could have driven prices higher, these events failed to break oil out of its trading range. While output cuts supported prices from falling further, they did not push them significantly higher. Additionally, speculation around potential further sanctions on Russia did not materially impact prices.

OPEC+ Policy and U.S. Energy Strategy Impact Oil Prices

Emkay highlighted that OPEC+ has decided to gradually ease its production cuts, with a planned withdrawal of 2.20 million barrels per day from April 2025. This move could introduce a short-to-medium-term downward bias in oil prices as more supply enters the market.

Meanwhile, the U.S. has been striving for energy self-sufficiency, a policy goal that has gained further traction under the current administration. Emkay observed that the focus remains on ensuring affordable energy for the public, which is expected to keep oil prices in check. While further depreciation in the U.S. dollar due to potential Federal Reserve rate cuts could contribute to rising oil prices, Emkay pointed out that supply-demand fundamentals might not necessarily support a prolonged rally.

Weaker demand from China, driven by sluggish economic growth and low consumer spending, coupled with a rising adoption of electric vehicles and single-digit global oil demand growth projections, are expected to continue exerting downward pressure on oil prices. However, Emkay cautioned that any escalation of sanctions or military conflicts involving Iran—either by the U.S. or Israel—could drive oil prices higher. Given these dynamics, Emkay revised its previous oil price forecast of USD 75 to USD 80 per barrel to a new range of USD 70 to USD 75 per barrel.

Another brokerage

Last week, JM Financial Institutional Securities projected that Brent crude would stabilize around current levels. The brokerage reiterated its preference for upstream oil companies like ONGC and Oil India over oil marketing companies (OMCs), maintaining a cautious outlook on the latter despite their improved valuations. JM Financial emphasized that while OMC stocks are trading near their historical price-to-book value averages—around 1-1.1 times—the firm remains uncertain about the risk-reward balance in the sector.

Overall, Emkay and JM Financial suggest that oil prices will remain within a stable range, with downside risks due to increased supply and weaker global demand. While short-term fluctuations are possible due to geopolitical developments, the long-term trajectory appears to be constrained by structural supply-demand factors.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.