Geopolitical tensions may keep crude prices elevated, pose challenges for India: Ambit report
New Delhi, March 26
Global energy disruptions and rising geopolitical risks are expected to keep crude oil prices high and create challenges for India's oil and gas sector in the coming years, according to a report by Ambit Institutional Equities.
The report 'India's Energy Compass: The Strategic Shift (2015-2029)' noted that the global energy market has entered a period of significant uncertainty following recent geopolitical tensions in the Middle East.
"The global energy complex has entered a period of structural dislocation following the 2026 Middle East conflict," the report said.
It added that attacks on key infrastructure have significantly impacted global supply chains.
"Kinetic strikes on critical infrastructure have removed 2.5mbd of refining capacity and 17% of Qatari LNG supply," the report stated, adding that repair timelines could extend up to five years.
According to the report, the disruption has also affected global shipping routes, further tightening energy supplies.
"The effective closure of the Strait of Hormuz has forced a 95% reduction in maritime transit, rerouting trade via the Cape of Good Hope and inflating freight rates by 50%," it said.
Ambit Institutional Equities expects crude oil prices to remain structurally higher in the near term due to these disruptions. "Brent crude is established in a $80-$100/bbl range, supported by a physical market shortage of 7mbd and urgent OECD/SPR restocking requirements," the report noted.
The report further stated that geopolitical risk premiums are likely to remain embedded in energy prices for several years. "We expect protracted normalization of supply-demand dynamics and geopolitical risk premium will remain high till FY30," it said.
Ambit also highlighted that India is increasingly exploring energy partnerships to diversify its supply sources. It cited Reliance Industries' partnership with America First Refining to build a refinery in Texas as an example of this strategy. The report said the partnership could help India secure long-term hydrocarbon supplies while reducing reliance on traditional suppliers in volatile regions.
At the same time, the report cautioned that higher crude prices could pressure the financials of oil marketing companies (OMCs). Elevated crude prices and limited intervention on retail fuel prices could compress margins for OMCs in the coming years, potentially impacting their balance sheets, it added.
Overall, Ambit Capital noted that the evolving geopolitical landscape and energy supply disruptions are reshaping India's energy strategy, pushing companies to secure long-term supply partnerships and diversify energy sources to manage risks in the global oil and gas market.
— ANI
Reader Comments
$80-$100 range for years? This is going to hit the common man's pocket hard. Petrol and diesel prices will shoot up, leading to inflation across the board. Hope the strategic reserves are being filled adequately.
The Reliance move to build a refinery in Texas is a smart long-term play. We need to reduce dependency on the Middle East. Diversification is key for energy security. More such partnerships, please!
While the report is detailed, it feels a bit alarmist. The global economy always finds a way to adapt. Yes, there will be challenges, but India's growth story is resilient. Let's not panic.
The pressure on OMCs is a real worry. If their margins get compressed, they might cut back on investments or the government will have to give subsidies again. Tough balancing act ahead for policymakers.
Time to seriously push for electric vehicles and public transport. We can't keep being at the mercy of global oil markets. This crisis should be the catalyst for a green energy revolution in India. 🌿
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