Oil Market Complexity Drives Physical Prices to Nearly ₹145 per Barrel

Analysts warn that the oil market has become increasingly complex, with significant discrepancies between benchmark and physical crude prices. Anindya Banerjee, Head of Commodities Research at Kotak Securities, noted that rising shipping costs are widening the gap between quoted and actual market prices. He explained that a ₹100-a-barrel screen price could translate to nearly ₹145 per barrel in the physical market, due to soaring VLCC freight rates that add another ₹25 or more per barrel.

Banerjee highlighted that the current oil market is commanding a substantial premium due to refinery outages and the ongoing Russia-Ukraine war, which has a greater impact than conflicts in West Asia. Despite geopolitical disruptions, India remains well placed with sufficient refining capacity and diversified sourcing, protecting it from physical shortages. At the time of reporting, Brent crude was trading at around ₹101.31 per barrel, while crude oil was at ₹89.71 per barrel.

On precious metals, Banerjee stated that elevated US yields are likely to keep gold and silver prices within a range until the US interest-rate cycle turns. Additionally, as the Reserve Bank of India's Monetary Policy Committee begins its meeting, he 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.