Kotak Securities Warns of Crude Oil Price Gaps

Anindya Banerjee, Head of Commodities Research at Kotak Securities, warned that soaring shipping costs are creating a significant gap between benchmark crude oil prices and physical market costs. He noted that while screen prices may show USD 100 per barrel, the physical cost could reach nearly USD 145 per barrel, driven by VLCC freight rates exceeding USD 1 million.

Banerjee attributed this market premium to refinery outages and the Russia-Ukraine war, which he claims has a larger impact than conflicts in West Asia. Despite these pressures, he stated that India remains well-positioned because of diversified sourcing and surplus refining capacity.

Regarding monetary policy, Banerjee predicted the Reserve Bank of India may implement a 25 basis point interest rate hike in October and another in December. He cited massive liquidity within the financial system as the primary reason for these expected increases.