Oil drops to pre-war levels

The sharp fall in oil prices signals that the war-driven risk premiumis rapidly fading as supply concerns ease

FPJ News Service mumbai

Global benchmark Brent crude briefly slipped below $72.48 per barrel on Thursday, its lowest level since before the US and Israel launched strikes on Iran on February 28, before recovering slightly to trade near $72.63. The sharp fall signals that the war-driven risk premium in oil is rapidly fading as supply concerns ease.

Oil prices extended losses for a fourth straight session as expectations of higher crude supply from the Middle East outweighed concerns over global demand. Brent crude for August delivery fell $1.06, or 1.44%, to $72.68 a barrel, while US West Texas Intermediate (WTI) crude declined 76 cents, or 1.08%, to $69.58 a barrel.

The decline follows improving diplomatic engagement between the US and Iran after both sides signed a Memorandum of Understanding on June 17, establishing a 60-day negotiation window over Tehran’s nuclear programme and broader measures to end hostilities.

Market sentiment also improved after peace talks in Switzerland resulted in a partial easing of US sanctions on Iranian oil exports, raising expectations of additional crude returning to global markets.

A major factor behind the correction has been the gradual resumption of shipping through the Strait of Hormuz, one of the world’s most critical oil transit routes. The waterway carries a significant portion of global crude and liquefied natural gas shipments.

Maritime intelligence data showed vessel movement through the strait has increased steadily in recent days, easing fears of prolonged supply disruptions, although traffic remains below pre-war levels.

Despite the sharp fall in crude oil prices, retail fuel rates remained unchanged on Thursday. Petrol and diesel prices had been raised by about Rs 7.50 per litre each during the recent spike in international oil prices, but state-owned fuel retailers have so far refrained from cutting pump prices, according to industry data.