Crude oil prices on Wednesday dropped to their lowest level ever since the conflict began. Easing tensions in the middle east except a higher rate of oil supply as vessels containing oil transit the Strait of Hormuz.
As of 8 am on Wednesday, Brent crude was trading at $76.54 per barrel, while US West Texas Intermediate (WTI) crude stood at $72.69 per barrel, extending losses seen over the past two sessions.
The biggest reason for the drop in the oil prices is the gradual return of supplies to the global market. More oil tankers that had been stranded in the Gulf during the Iran conflict are now preparing to move through the Strait of Hormuz. The market has also been pressured by a US decision to grant Iran a 60-day sanctions waiver, allowing the country to continue selling crude oil. As per the relief, Oman and Iran have agreed to continue discussions on navigation through the strategic waterways.
While optimistic trends are setting in. it is very quick enough to predict if oil prices would fall further. Experts predict the downside risk remains intact. They caution against assuming that oil prices will continue falling in a straight line. The Strait of Hormuz remains a sensitive region, and any fresh geopolitical tensions could quickly push prices higher again.
Meanwhile, lower crude oil prices for India is a positive deal as the nation imports 85% of its oil requirements. Cheaper oil helps reduce the country’s import bill, supports the rupee and eases inflationary pressures. However, expecting an immediate cut in petrol and diesel prices would take time. Fuel prices in India are influenced by a combination of crude oil prices, taxes, refining margins and marketing costs.