On Tuesday, crude oil prices on the country’s futures market Multi Commodity Exchange increased by Rs 226 to reach a new record level of Rs 10,150 per barrel. The reason for this is the continuous concerns regarding supply disruptions and instability related to the US-Iran conflict. On the Multi Commodity Exchange, crude oil prices for June delivery rose for the third consecutive session.
It jumped by Rs 226, or 2.3 percent, to its all-time high of Rs 10,150 per barrel. Analysts said that despite weakness in global benchmarks, domestic crude oil futures remained strong. This was because signals of a possible diplomatic truce between Washington and Tehran had softened some geopolitical risk premiums.
Slowdown in international market
In international markets, Brent crude for July delivery fell nearly 2 per cent to $110.32 a barrel, while West Texas Intermediate (WTI) for the same month’s contract slipped 1 per cent to $103.45 a barrel. Brokerage firm Kotak Neo (earlier Kotak Securities) said that WTI crude oil slipped to around $ 103 per barrel on Tuesday. After several sessions of strong rally, it moderated as the geopolitical risk premium declined slightly.
Oil prices softened when US President Donald Trump said that he has canceled the planned military attack on Iran after the appeal of Saudi Arabia, Qatar and UAE. This has raised hopes that diplomatic talks can resume. However, traders remained cautious as Iran has so far shown no signs of any breakthrough in talks with the US.
Russian oil relief
Crude oil prices have increased rapidly in the last one week. The main reasons for this are the stalling of nuclear talks and the obstructions in the movement of tankers through the Strait of Hormuz. The Strait of Hormuz is a major artery of the global energy transport route. Kotak Neo said concerns over Iran’s nuclear program and the ongoing blockade continue to support high risk premium in oil markets.
The brokerage firm further said that a temporary waiver given by the US, under which the sale of Russian crude oil already loaded in tankers is allowed, may provide limited relief on the supply front in the near future. The firm also added that any sign of progress in diplomacy could encourage profit-booking. However, due to the ongoing blockage in the Strait of Hormuz and persistent geopolitical tensions, crude oil prices are likely to remain volatile in the near future and remain supported.
