Kotak Securities Says Physical Crude Prices Could Near USD 145 per Barrel

Kotak Securities has warned that physical crude oil prices could be significantly higher than benchmark rates, driven by soaring shipping costs. Anindya Banerjee, Head of Commodities Research at Kotak Securities, noted that a USD 100-per-barrel screen price might translate to nearly USD 145 per barrel in the physical market due to surging freight rates. He highlighted that VLCC freight rates have crossed USD 1 million, adding around USD 25 or more per barrel to the cost.

The oil market has become increasingly complex, with different prices for the same product and rising shipping costs further complicating the landscape. Banerjee emphasized that the price seen on the screen is largely hypothetical, while the actual price at which physical crude is cleared is different. At the time of reporting, Brent crude was trading at around USD 101.31 per barrel, and crude oil was at USD 89.71 per barrel.

Banerjee also pointed out that the Russia-Ukraine war continues to have a greater impact on crude markets than the conflict in West Asia. He noted that India remains well positioned despite geopolitical disruptions, with sufficient refining capacity and diversified sourcing protecting it from physical shortages. India has also become a major swing supplier of fuel products to the world.

On precious metals, Banerjee commented that gold and silver prices are unlikely to see much upside as long as US yields remain elevated. He added that the market will wait for the US interest-rate cycle to turn. Meanwhile, as the Reserve Bank of India’s Monetary Policy Committee begins its meeting, Banerjee expects a 25 basis point rate hike in October, with another possible hike in December, bringing rates toward 5.75 percent depending on oil price trajectories.