Crude oil futures tumble 5% as US-Iran diplomacy hopes ease supply fears

New Delhi: Crude oil futures fell more than 5 percent on Monday as hopes of progress in US-Iran negotiations and a recovery in West Asian supplies eased concerns over immediate shortages.

On the Multi Commodity Exchange (MCX), crude oil for November delivery declined Rs 429, or 5.02 percent, to Rs 8,125 per barrel. The December contract dropped Rs 394, or nearly 5 percent, to Rs 8,084 per barrel.

Follow The PSUWatch Channel on Whatsapp

Global benchmarks also retreated. West Texas Intermediate (WTI) fell USD 3.45 to USD 87.38 per barrel, while Brent futures for January delivery declined USD 4.16, or 4.23 percent, to USD 94.16 per barrel.

Diplomacy weighs on prices

The sell-off reflected expectations of a possible de-escalation in the West Asia conflict and a gradual restoration of oil supplies, said Ajit Mishra, SVP–Research at Religare Broking.

"Crude oil remained under pressure, with Brent trading below USD 95 per barrel and WTI near USD 88, as Trump indicated that additional military action against Iran would be unlikely provided ongoing negotiations continue to make progress," said Kaynat Chainwala, AVP – Commodity Research at brokerage firm Kotak Neo.

Trump’s remarks strengthened expectations of a diplomatic resolution, outweighing concerns over recent Houthi attacks on Saudi infrastructure and reported disruptions to maritime traffic near the Strait of Hormuz, she said.

Supply risks persist

Mishra cautioned that the geopolitical situation remained fragile, with fresh attacks on shipping routes and energy infrastructure keeping supply risks elevated. Expectations of a growing global supply surplus could also limit any sustained price recovery.

He said the near-term outlook pointed towards consolidation with a downside bias, provided negotiations advanced and supplies gradually normalised.

Investors will track US-Iran talks, the resumption of shipping through the Strait of Hormuz and any further attacks on regional energy infrastructure, Chainwala said.

Follow PSU Watch on LinkedIN

Diplomatic progress, including talks in Washington involving Qatari officials, could deepen the correction. A breakdown in negotiations or renewed supply disruptions, however, could restore the geopolitical risk premium, she added.

Relief for India

For India, lower oil prices offer potential relief through easing inflationary pressures, reducing the current account burden and supporting currency stability, Mishra said.

(PSU Watch is India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy. 👉 Click to join our channel now: PSUWatch WhatsApp Channel. Prefer LinkedIn? Follow PSU Watch on LinkedIN. Click to stay connected on Twitter here and stay updated.)