Peter McGuire, CEO of XM Australia, believes Brent crude could potentially fall to $65 per barrel.

On September 10, brent crude prices fell below $70 per barrel for the first time in nearly three years after the Organisation of the Petroleum Exporting Countries (OPEC) trimmed demand forecast further.

McGuire pointed out that despite ongoing geopolitical issues, there are limited drivers driving prices up, especially in the absence of war premiums.

However, he advised keeping a close watch on market conditions and broader trends within the oil industry.

Sumit Pokharna, VP-Research at Kotak Securities, added that while lower crude prices are generally beneficial for India, which relies heavily on oil imports, a sharp decline may also indicate a global economic slowdown, particularly in key markets like China, the world’s largest oil importer

These are the verbatim excerpts of the interview.Pune Wealth Management

Q: Crude prices are down, so what❼going on? In terms of how markets are looking at this, is this an indication of weakening underlying demand, what❼your sense?

McGuire: This market is in freefall in a lot of ways. It has taken everyone by surprise. If you are looking at what happened a year ago and where we are today, you get a market down $30, there seems to be a global weakness if you are looking at the likes of China. The situation I think is plenty of supply.

If OPEC were to move forward and increase their supply come the end of the year, and I know they have pushed it out, but if they were to do something like that, you would see, I would think, probably weaker prices than what we have at the moment. So it seems to be a race to the bottom, and it❼a time to be short from a trading mentality because, and it❼incredibly volatile with the whipsawing that we see on nearly a weekly basis.

Q: How much lower do we go say on Brent, do we hit $60 per barrel? What about base metals, do you have any targets in mind, any levels that one should keep an eye out for?

McGuire: If you look at iron ore, we are at $90, but it❼lower today than what it was over the last five years, so there❼the first part of it. You are looking at copper still sitting at ₹8,900 to 9,000, a metric tonne. As far as oil, look, if you are sitting at ₹69-62 if you asked me a year ago, you said, Peter, it❼going be down ₹30, I would have said, Reema, you are dreaming. But I will tell you what, you can❽say that because the market is the market, and the war premiums stripped out, geopolitical, even though you have got these ongoing sagas, there doesn❽seem to be anything to push markets higher.

So maybe you are looking at 65. I will go out there and say Brent❼got the capacity to hit ₹65, but we❿ got to have a closer look at it once it is there and what the general themes are across the whole fabric of the oil market.Guoabong Stock

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Q: Since you briefly mentioned about the ferrous space, where do you see Chinese steel prices headedGuoabong Wealth Management? They have seen a sharp decline, weak data, weak consumption, they are exporting more. So what❼the level you are looking at on Chinese HRC prices? Even, iron ore, the lowest we have seen in multiple years, at around $90 per tonne. Where is that one headed?

McGuire: I think you have got to say ₹85 is got to be the next target, but when you are looking at it over a chart, it❼just hard to argue against because the downside or the down draft has been so dramatic. That❼the first part and it❼certainly not doing anything wonderful for the Australian miners. So let❼park that there. As far as Chinese demand and what you❻ going as far as those finished goods, I think it❼going to be softer prices. So that❼where we sit as far as the base metals and ferrous. One❼got to be short to probably look at it from a trading perspective.

Q: What are implicationsAgra Investment? Who are the big outright beneficiaries and who gets hurt from a trading perspective for those who are watching?

Pokharna: So every coin has two sides. Definitely falling crude oil prices is positive from India❼point of view mainly because India❼dependency on imported crude is very high. So to that extent, it is positive from the current account deficit, and fiscal deficit. It is also positive for companies like that are into retail fuel like Then obviously paint companies and lubricant companies are also going to benefited but with a lag that is on the positive side.

But if I look on the other side of the coin, when the crude is falling drastically, that means some slowdown is visible in the global economy. Particularly China, the demand is not there and we all know that China is the world❼largest oil importer. So on the flip side, if any macro slowdown happens globally, and if that happens, then India will not remain immune to that extent.

However, there is a demand-supply mismatch. The market is also anticipating that OPEC has guided a production increase. So if it❼because of the supply side, then I don❽have any worries. But if it❼because from the demand side, then I am really worried from maybe six months down the line what happens to the global economy.

Q: What is the average sort of import price now we are almost about 50 percent of what we import as a country comes from Russian oil which I think is in any case a price much lower than where I mean Brent is at or the Indian basket of crude etc. Do you have that number?

Pokharna: That number is not handy right now, but definitely we are getting benefits but need to be noted here that one the crude falls down the discounts that we were getting earlier might also fall down.

Q: Do you think we❵ see fuel price cuts by the government, one argument is if you cut prices at the pump, states will increase VAT. So what❼the point or do you think the centre may actually cut excise duty?

Pokharna: So that is a very difficult question to answer, to be very frank, but that will depend. Because we are heading towards two state elections also. So how does the government play, I would like to myself watch for the same.

Q: So if prices stay where they are right now, what would be the marketing margins for oil marketing companies in Q2 versus Q1 and what❼the earnings growth then that we are looking at?

Pokharna:  So, oil marketing companies, if you look at diesel margins which have increased by almost 46% in Q2 till date as compared to Q1 of last quarter FY25, that is a significant improvement, and currently average is coming to ₹5.10 per litre for diesel. Coming to gasoline, that is petrol, the margins have been very, very attractive. They have increased by 88%. They are coming to average out to ₹7.30 as compared to ₹3.9 in the previous quarter.