Brent could touch $80 as economic recovery picks up: Emkay Wealth

The rise, however, could be capped if the dollar strengthens against major currencies

2 min read Last Updated : Jun 16 2021 | 10:52 PM IST

Brent crude gained for a fifth day on Wednesday, climbing towards $75 a barrel to its highest since April 2019, supported by a recovery in demand from the pandemic and a drop in US crude inventories. A study by Emkay Wealth Management shows that Brent crude may test even higher levels of $78-80 per barrel but this rise may be capped if the dollar strengthens against major currencies.

At 7 pm IST, Brent was trading at $74.18 a barrel, up 0.26 per cent, while WTI crude was at $72.09 a barrel, down 0.04 per cent.

Emkay said the recovery in economic activity in the US, Europe and some leading Asian countries was underpinning the rise in oil prices. “Overall economic conditions warrant higher consumption and therefore, higher prices. Again, much would depend on the stance taken by Opec+ which may be meeting soon. Russia is now in sync with Opec in achieving the production cuts that Opec had envisioned earlier,” it said.

The asset manager said a nuclear deal and improvement in ties between the US and Iran may help cool off oil prices.“One major factor that dominated oil markets is the possibility of better relations between the US and Iran. This would mean that the supply from Iran will be in the markets as soon as such a pact is reached. Therefore, the prices should naturally come down.”

On the downside, Emkay sees Brent prices getting support at $68-70 levels.

But the prospect of an imminent rise in Iranian oil exports looks less likely, according to many analysts. Indirect talks between Tehran and Washington on resuming the 2015 nuclear accord resumed in Vienna on Saturday.

"Ongoing efforts to revive the Iranian nuclear deal have so far failed to bear any fruits," said Stephen Brennock of oil broker PVM. Brent has risen 44 per cent this year. "Even non-energy traders are placing bets that oil prices will continue to rise," said Edward Moya, senior market analyst at brokerage OANDA.