Kotak Securities Warns of Wider Gap Between Screen and Physical Oil Prices

According to Anindya Banerjee, Head of Commodities Research at Kotak Securities, the oil market has grown increasingly complex, with significant disparities between screen prices and actual physical market costs. Banerjee explained that soaring shipping costs are widening this gap, with a ₹100-per-barrel screen price potentially translating to nearly ₹145 per barrel in the physical market. He highlighted that VLCC freight rates have surged past ₹1 million, adding approximately ₹25 or more per barrel.

Banerjee also noted that the Russia-Ukraine war continues to have a greater impact on crude markets than conflicts in West Asia, contributing to a substantial premium in oil prices. Despite this, India remains well positioned due to available oil supplies and sufficient refining capacity, which helps mitigate physical shortages. At the time of reporting, Brent crude was trading at around ₹101.31 per barrel, while crude oil was at approximately ₹89.71 per barrel.

In addition to oil, Banerjee commented on precious metals, stating that elevated US yields are likely to keep gold and silver prices range-bound until the US interest-rate cycle shifts. As the Reserve Bank of India's Monetary Policy Committee began its meeting on Monday, he predicted a 25 basis point rate hike in October, with another possible hike in December, pushing rates toward 5.75 percent depending on oil price trends.