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Informist, Wednesday, Feb. 5, 2025

 

By Ashutosh Pati and Sandeep Sinha

 

MUMBAI – Crude oil prices may have given up most of the gains made since the beginning of 2025, but market participants believe prices could rise this month on uncertainty around US President Donald Trump's tariff policies and increasing pressure against Iran and Russia.

 

"Trump has issued a directive that aims to ramp up economic pressure on Iran. This could see it (the US) target Iran's exports of crude, which are currently around 1.5 million barrels per day, according to ship tracking data," Daniel Hynes, senior commodity strategist at ANZ Research, said in a note.

 

The US president Tuesday reimposed maximum "economic pressure" on Iran by sanctioning enforcement mechanisms on those acting in violation of existing sanctions, and plans to drive Iran's oil exports down to zero. This could create a supply gap in the crude oil market and push up prices.

 

"...stricter enforcement could see as much as 1 million barrels per day of supply at risk. However, reduced flows from Iran will not help in lowering oil prices, something that President Trump is very keen to achieve," Warren Patterson, head of commodities strategy at ING Economics, said in a report.

 

Meanwhile, the joint ministerial monitoring committee of the Organization of the Petroleum Exporting Countries at its meeting Monday stuck to its policy of increasing production from April in a phased manner. "He (Trump) would need to see (if) OPEC increases oil output (something he has already called for) to offset any potential Iranian losses. However, convincing Saudi Arabia and other members to increase output may prove difficult at current price levels," Patterson added.

 

The cartel and Trump often clashed during his first term when he demanded that OPEC raise crude oil output to compensate for the fall in Iranian supply due to the US sanctions. Eight members of OPEC and its allies--Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman--are scheduled to unwind their voluntary production cuts in a phased manner from April. The cartel is set to bring back a daily supply of around 2.2 million barrels over an 18-month period starting April.

 

Shweta Shah, energy analyst at Motilal Oswal Financial Services, expects the oil market to move to a more modest surplus of 100,000 barrels per day this year from the earlier estimate of 750,000 barrels per day. "Crude oil prices are expected to stay higher as disruption risk overpowers the demand concerns," Shah said.

 

On Monday, Trump agreed to halt proposed tariffs against Canada and Mexico for one month after both countries pledged to take action against drug trafficking across their borders with the US. Earlier, he had imposed 25% tariffs on imports from Canada and Mexico and an additional 10% on imports from China. However, a lower tariff of 10% was also proposed for energy imports from Canada. Sriram Iyer, senior research analyst at Reliance Securities, said crude oil prices could weaken as the delay in trade tariffs could ease supply concerns.

 

"The tariffs against Canada and Mexico are not completely off the table if no permanent solution satisfactory to Trump is found in the next 30 days," Carsten Fritsch, commodity analyst at Commerzbank AG, said in a report. "Until then, the motto 'postponed but not cancelled' applies."

 

Canada is one of the more important crude oil suppliers for the US. In 2024, the US imported more than 4 million barrels of its daily crude oil consumption from Canada. Mexico accounted for around 470,000 barrels per day or 7% of daily US crude oil imports, Fritsch said, citing data from the US Department of Energy.

 

According to the median of estimates by 19 broking firms and an independent analyst polled by Informist, the February crude oil contract on the Multi Commodity Exchange of India is seen in the range of INR 6,028.50-INR 6,750.00 per barrel this month. The March contract of the West Texas Intermediate crude on the New York Mercantile Exchange is seen in the range of $68.58-$78.00 per barrel for the rest of the month.

 

According to the US Energy Information Administration, crude oil inventories in the US were around 6?low the five-year average at 415.1 million barrels in the week ended Friday. Inventories are down about 2% from the corresponding period last year.

 

However, the ongoing trade tension between the US and China poses a downside risk to crude oil prices. As the latter has announced retaliatory tariffs against the US, renewed fears of a trade war between the world's top two economies could dampen demand for oil. 

 

At 1529 IST, the February crude oil contract on the MCX was down 0.1% at INR 6,335.00 per barrel and the March WTI contract on NYMEX was down 0.6% at $72.27 per barrel.

 

China Tuesday announced a retaliatory 15% tariff on American coal and liquefied natural gas along with 10% on US coal and liquefied natural gas and 10% on US crude oil, farm equipment, and some automobiles, minutes after the US tariffs on Chinese goods came into effect. China's tariffs will come into effect Monday.

 

"However, with these (Chinese) tariffs only coming into force on Monday, there is still room for a deal, although there are reports that President Trump is in no rush to talk to President Xi (Jinping)," Patterson said.

 

Following is a summary of the poll by Informist on crude oil prices for February and details of the estimates by respondents:

 

Brokerages	MCX support (in rupees)	MCX resistance (in rupees)	NYMEX support ($)	NYMEX resistance ($)
Angel One	5700	7250	65.8	82.7
Axis Securities	6200	6700	68	76
Emkay Global	6050	6700	70.55	75
Finlit Consulting	6300	6600	68	76
HDFC Securities	6130	6900	68.5	80.8
ICICI Securities	5900	6800	68	78
JM Financial Services	6100	6750	67	78
Kedia Comtrade	6100	6800	71	78
Kotak Securities	5900	6950	69	80
LKP Securities	6100	6625	68	76
Mirae Asset Sharekhan	5800	6850	67	80
Motilal Oswal	5850	6750	68.65	77.25
Nirmal Bang	6250	6700	72.3	80
PhillipCapital	6000	6900	73	77
Prithvi Finmart	6080	6740	68	78
Reliance Securities	6150	6420	69.5	75
Religare	5700	6950	66	81
SMC Global	5890	6520	68.8	74.9
Ventura Securities	6000	6600	69.5	77
Vijay Bhambwani	6007	6811	69.4	78.4
Median	6028.5	6750	68.58	78

 

End

 

US$1 = INR 87.46

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Nishant Maher

 

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