Due to tensions in the Middle East, crude oil prices have seen a lot of volatility in the last few days. However, oil prices fell slightly after an initial agreement between the US and Iran to extend the ceasefire for 60 days. As of 7:00 am on Friday, Brent crude was trading at $93 per barrel, down 0.22%. US benchmark crude (WTI) was also seen trading at around $88 per barrel. This agreement between America and Iran has raised hopes that the supply of oil through the Strait of Hormuz can become normal, which has created an atmosphere of relief in the market. This month, oil prices (especially Brent crude) have fallen significantly by about 18%, which has helped create a more comfortable environment in the market.
What is the reason for the fall in crude oil prices?
According to CNBC, a report by Axios claims that oil shipments through the Strait of Hormuz can resume without any interruption. However, according to a source familiar with the matter, US President Donald Trump has not yet given final approval to the terms of the agreement. Many times in the past, claims of progress have been made in talks between America and Iran, but every time no complete solution has been achieved. Still, the market is optimistic that an agreement could be reached soon. Due to this optimism, Brent crude looks poised to register its biggest monthly decline since 2020.
Will petrol and diesel prices fall?
If crude oil prices continue to fall – and Brent crude remains at or below $93 per barrel – petrol and diesel prices are likely to fall in the near future. Generally, lower oil prices in the international market reduce the operating costs of oil companies, the benefits of which can be passed on to consumers. However, the final decision ultimately depends on the policies of oil companies and governments.
Is there still pressure on the Strait of Hormuz?
Due to increasing tension between Washington and Tehran, pressure on the Strait of Hormuz is increasing. Although the route supplies large quantities of oil to the global market, blockages have affected daily supplies of millions of barrels. As a result, there is considerable turmoil and anxiety in the global energy markets. Even if an agreement is reached to extend the ceasefire, it will not be an easy task to immediately bring oil supplies back to normal levels. Clearing mines from the Strait of Hormuz, restarting shuttered oil fields, and repairing energy infrastructure damaged by drone and missile attacks could take a long time. Additionally, oil tankers will also take several weeks to reach their destinations in importing countries.