Crude oil futures tumble 2% on Trump-Iran thaw

Easing geopolitical concerns and progress in US-Iran negotiations weakened energy markets, while traders monitored supply risks and demand outlook

Crude oil prices declined sharply on Friday after signs of easing tensions between the United States and Iran reduced fears of supply disruptions in global energy markets. On the MCX, crude oil contracts for June delivery fell by ₹140, or 1.68 per cent, to ₹8,204 per barrel.

  The contract recorded a business turnover of 12,005 lots during the session.The July crude oil contract also moved lower. It slipped ₹137, or 1.66 per cent, to ₹8,103 per barrel with a turnover of 4,711 lots.

 The fall in domestic crude futures mirrored weakness in international oil benchmarks following comments from US President Donald Trump that suggested progress in negotiations with Iran. 

  According to brokerage firm Kotak Neo, Brent crude dropped below $89 per barrel while West Texas Intermediate crude slipped below $86 per barrel after Trump said planned military strikes on Iran had been paused. 

  The US President indicated that efforts towards a peace arrangement, reportedly supported by Saudi Arabia, the UAE, Qatar and Turkey, were making progress. 

The development eased immediate concerns over a wider conflict in the Gulf region that could have threatened oil supplies and pushed prices higher. However, market participants remain cautious as Iranian officials stated that no final agreement has been approved.  The conflicting signals have left investors uncertain about the future direction of negotiations. Meanwhile, the latest monthly report from the OPEC showed that crude production by Declaration of Cooperation countries declined by 190,000 barrels per day to 33.13 million barrels per day in May.

  OPEC also maintained that China, India and other developing Asian economies would remain the key drivers of global oil demand growth. Analysts said that despite Friday’s decline, crude oil markets could remain volatile. Any setback in US-Iran talks or renewed geopolitical tensions could quickly revive concerns over supply disruptions. 

  In addition, peak summer fuel demand and lower production levels continue to provide underlying support to global oil prices. 

Market participants are also monitoring developments in global demand. While lower geopolitical tensions reduced the risk premium in oil prices, expectations of steady consumption from major economies, particularly India and China, continue to provide support.  Analysts believe any disruption to negotiations could quickly reverse the current weakness in crude markets.

—PTI