An important and welcome news is coming from the international market for both the global market and local consumers. Amid long-running tensions in West Asia (Middle East), crude oil prices have suddenly fallen. Following US President Donald Trump’s decision to postpone or stop a possible military attack against Iran, crude oil prices have fallen by more than 2% in the international market. Let us understand in simple words why this sudden and major change occurred in the global market, and in which direction oil prices are likely to move in the coming days.
How did Donald Trump’s decision stabilize the market?
In the past few days, tensions in West Asia had increased to such an extent that investors feared that there could be a direct confrontation between the US and Iran. If this were to happen, the global crude oil supply chain would be severely disrupted, and crude oil prices would exceed $111 per barrel. However, as soon as US President Donald Trump hinted at not attacking Iran – but instead choosing the path of negotiations – the “war premium” (fear of conflict in the market) disappeared from the market. Soon after, global benchmarks – Brent crude and US crude (WTI) – fell more than 2%.
Which direction will prices go now?
According to leading commodity market analysts and experts, this recent decline in crude oil prices could be both temporary and long-lasting; This will depend on the following factors:
Supply recovery: If diplomatic talks between the US and Iran proceed, supplies from oil producing countries (OPEC+) are likely to remain stable, allowing prices to return to the $80-$85 per barrel range.
Demand from China and US: If global industrial demand remains sluggish, further decline in crude oil prices may be seen.
Why is this news so important for India?
India imports more than 80% of its crude oil requirement from abroad. A 2% reduction in the price of crude oil in the international market directly means that India’s import bill will reduce. This will reduce the losses incurred by Indian oil marketing companies (HPCL, BPCL, IOCL), and in the coming days, common citizens of the country can get a lot of relief from the rising prices of petrol, diesel and domestic LPG cylinders.
