Kolkata: Crude oil futures plunged 4% in early trade on Wednesday triggered by brightening prospects of a ceasefire in the 25-day old military conflict in the Gulf crisis that has choked world energy supplies significantly. According to reports, West Texas Intermediate crude futures declined to as low as $87.80 a barrel — posting a fall of $3.49, or 3.8%. Trump has remarked that once the hospitlities stop, crude prices will fall “like a rock”.
It followed reports of the US dispatching the Iranian leaders a 15-point plan to end the war in the Middle East. However, the crucial Strait of Hormuz largely remained out of bounds to ships that maintained the choke on world crude oil shipments. Indians are watching the price line eagerly since the government has battled odds to resist any rise in the retail prices of petrol and diesel so far.
Unstable signals, volatile prices
Following Donald Trump’s social media post on Monday, Iran trashed the claims of the good and productive talks that the US president referred to and described it as fake news. It led to volatility in the crude oil prices too. Reports said WTI climbed 4.8% on March 24, before declining in response to the news item of Washington sending Teheran proposal and terms for ending the war.
Trump told the media on Tuesday the they were making progress in the direction of negotiating an end to the hostilities in the war with Iran. A news platform of Israel (Channel 12) reported the plan and said a one-month ceasefire could be announced according to a mechanism that US Middle East envoys Steve Witkoff and Jared Kushner are putting together. However, it now depends on the response of Teheran to any proposal that comes from Washington.
Natural gas hit harder
Significantly, natural gas supplies have been hit harder than that of crude oil. The problem with natural gas is that the entire supply infrastructure is such that it requires special carriage, handling and transporting infrastructure that can attain the cooling and high pressure that the gas requires. Unlike crude oil, natural gas can’t be stored and needs just-in-time supplies. Moreover a number of gas fields have halted output following strikes by drones and missiles. This has badly disrupted natural gas supplies to different parts of the world.