Crude oil futures tumble over 7 per cent as US-Iran talks lift supply hopes

Crude oil futures on the MCX dropped sharply to a nearly three-week low after renewed hopes of US-Iran negotiations eased concerns over supply disruptions from West Asia. Analysts said domestic and global crude prices will remain driven by geopolitical developments and shipping activity

New Delhi: Crude futures tumbled Rs 550 to hit nearly a three-week low of Rs 7,563 per barrel on Monday, tracking a sharp decline in global oil benchmarks after renewed hopes of US-Iran negotiations eased concerns over supply disruptions from West Asia.

Traders said the steep decline came after US President Donald Trump said talks with Iran would resume, easing immediate concerns over supply disruptions through the Strait of Hormuz, a critical chokepoint that carries about one-fifth of global energy shipments.

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On the Multi Commodity Exchange (MCX), crude oil futures for August delivery plunged Rs 583, or 7.2 per cent, to Rs 7,530 per barrel.

The contract hit its lower circuit limit during intra-day trade and slipped to its weakest level since July 14, when it had settled at Rs 7,574 per barrel on the commodities bourse.

The September contract for crude futures also came under heavy pressure, falling Rs 461, or nearly 6 per cent, to Rs 7,378 per barrel amid broad-based selling by investors.

According to analysts, the retreat in domestic crude prices reflected a swift unwinding of bullish bets as market participants reassessed the risk of prolonged disruptions to crude supplies from West Asia.

“The August crude oil futures on the MCX resumed on a weaker note around the Rs 7,500-per-barrel level and, during intra-day trade, declined to hit the lower circuit limit during the session,” said Aamir Makda, Commodity & Currency Analyst, Technical Research at Choice Broking.

The retreat in domestic prices tracked a broad-based sell-off in global markets, with Brent oil futures for October delivery plunging USD 6.38, or 7.3 per cent, to USD 81.55 per barrel on the Intercontinental Exchange.

The US-based benchmark West Texas Intermediate (WTI) also slipped below the USD 80 per barrel mark, with futures on the New York Mercantile Exchange falling USD 5.89, or nearly 7 per cent, to USD 78.78 per barrel.

“WTI crude oil fell sharply and slipped below the USD 80 per barrel mark as optimism over renewed diplomatic efforts with Iran reduced concerns about potential supply disruptions in West Asia,” said Gaurav Garg, Head of Research, Lemonn Markets Desk.

Analysts said the correction also eased fears that elevated crude prices would add to inflationary pressures and force global central banks to maintain higher interest rates for longer.

Meanwhile, Trump said negotiations with Iran would take place on Monday but refrained from setting a deadline for a broader agreement.

He indicated that he had called off an imminent military strike in the hope of resolving differences over Tehran’s nuclear programme and reopening the Strait of Hormuz.

According to reports, shipping traffic through the Strait of Hormuz remained slow after attacks on commercial vessels.

However, two Saudi oil tankers crossed the Bab el-Mandeb Strait over the weekend despite threats from Yemen’s Houthis, easing immediate concerns over disruptions to global crude supplies.

Even so, geopolitical risks remain elevated.

Analysts said the conflict has expanded beyond the Gulf to the Red Sea and parts of the eastern Mediterranean. Iran has largely closed the Strait of Hormuz since the conflict began, disrupting one of the world’s most critical energy corridors and fuelling volatility in global oil markets.

Both domestic and international crude oil prices are likely to remain highly sensitive to developments surrounding the US-Iran negotiations and shipping activity through the Strait of Hormuz for fresh cues on the global supply outlook, they added.