Choice Institutional Equities — Oil Weekly (March 12, 2026)
Focus: Brent crude oil prices & macro oil market dynamics
Current situation:
Brent is trading around USD 97/b, up 5% from March 11, 2026.
Three vessels in the Strait of Hormuz were attacked on March 11, 2026. Shipments through the Strait are now close to zero.
The IEA has released 400 million barrels into the market, but the discharge rate is capped at 2 million barrels per day (mbd) — higher than the ~1.1 mbd seen during the Russia-Ukraine war.
Price trajectory framework (three phases):
Phase 1 (below USD 90/b): Initial supply shock pricing.
Phase 2 (USD 90–130/b): Precautionary demand — hoarding and inventory builds. The market is currently here.
Phase 3 (beyond USD 130/b): Scarcity premium phase that forces demand destruction. Choice estimates ~20 million barrels of demand destruction would be needed for the market to rebalance.
Key analytical points:
Despite a physical disruption of 7–11 mb/d, the market is pricing an effective deficit of ~20 mb/d, reflecting panic-driven hoarding.
If Hormuz remains closed into the 4th week without US-Israel-Iran negotiations, floating inventories will diminish and storage will tighten — accelerating prices toward ~USD 130/b by end of next week (from the report date).
Production ramp-up would take 15–20 days even after maritime transit resumes.
Bear case: If negotiations lead to reopening of the Strait, Brent could retreat to ~USD 80/b, as the precautionary demand premium unwinds, though a residual geopolitical risk premium may persist.
LPG & petroleum product prices:
Jet Kerosene (Singapore FOB) has risen to a record USD 225/b — above the 2022 peak of USD 166/b — due to supply constraints.
Gas Oil 10ppm (Singapore FOB) has risen to USD 154/b, but still below the 2022 peak of USD 181/b.
International Diesel (FOB) prices rose 65% month-to-date in March to USD 142.34/b versus USD 86.03/b in February.
Brent has only risen ~25% in comparison — meaning diesel cracks have expanded sharply.
Implication for Indian equities:
The divergence between surging diesel cracks (+65%) and Brent (+25%) is strongly positive for pure-play refiners.
For integrated OMCs, the marketing margin has turned negative at current price levels.
Choice raised its Brent estimate for CY2026 from USD 61.5/b to USD 66/b, citing delays in the Russia-Ukraine peace process and the impact of the current geopolitical crisis.
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