Oil prices have dropped by 5% globally after the US and Iran reached a peace agreement. Thus, reducing concerns over potential disruptions to oil supply from the Middle East. Brent crude declined to $84 per barrel, with WTI down to about $81 per barrel.
According to market reports, the price of Brent crude futures dropped $3.58, or 4.1%, to $83.75 per barrel. The US West Texas Intermediate (WTI) crude price saw a fall of $4.01, or 4.72%, to $80.87 per barrel. Both of them had already seen losses of more than 3%.
In India, crude oil prices on Multi-Commodity Exchange (MCX) also witnessed a similar downward movement, tracking global prices. MCX crude oil prices fell 5.32% to Rs. 7,544 per barrel. It is expected that Brent crude will trade within an $80-$88 per barrel range in the coming weeks, provided there are no disruptions to shipments.
The market's focus now shifts from political rhetoric to the agreement's implementation. Tanker traffic, export volumes, and compliance with the agreement will determine the next direction for prices. Moreover, the threat of rising prices still looms with any delay to the opening of shipping lanes. Any delay in reopening trade routes or a breakdown in diplomatic progress could push oil back above $90 per barrel.
Lower crude prices are a positive development for India, one of the world's largest oil importers. A fall in oil prices will be a blessing in disguise as it could ease inflationary pressures and help the economy grow.
Industries, including aviation, paints, chemicals, and tire manufacturing, would benefit from reduced production costs as crude prices drop. The oil marketing firms can also expect a better operational environment, with crude oil prices remaining below previous levels.
Experts suggest that, as of now, fears of oil supply disruptions have subsided. As long as peace efforts prove successful, crude prices are likely to come under pressure as energy passes through the Strait of Hormuz without any hitch.
Also read: Oil Prices Jump Above $94 as Strait of Hormuz Closure Sparks Supply Fears