Crude Oil Futures Tank Over 5 PC as US-Iran Peace Deal Revives Supply Outlook

New Delhi: Crude oil futures fell more than 5 per cent and slid to a three-month low of Rs 7,624 per barrel on Monday after the US and Iran reached a peace agreement and the reopening of Strait of Hormuz triggered a sharp sell-off in energy markets.

On the Multi Commodity Exchange (MCX), crude oil for June delivery declined Rs 449, or 5.56 per cent, to Rs 7,624 per barrel in a business turnover of 10,716 lots.

The July also dropped Rs 422, or 5.3 per cent, to Rs 7,546 per barrel in 5,110 lots.

Extending the sharp correction witnessed last week, crude oil futures remained under heavy selling pressure as traders continued to unwind positions built during the West Asia conflict.

Last week, crude oil had declined 6.3 per cent on the MCX.

Analysts said the domestic benchmark has now slipped to its lowest level since March 11, when it was at Rs 7,558 per barrel.

“MCX Crude oil declined sharply by around 5 per cent, with the broader trend remaining moderately bearish after reports of a US-Iran agreement raised expectations of increased energy exports and improved global oil supply,” Kaveri More, Commodity Technical Analyst At Choice Broking, said.

In the international markets, oil benchmarks also came under intense selling pressure after US President Donald Trump and Iranian officials announced a framework agreement aimed at ending months of hostilities and restoring maritime traffic through the Strait of Hormuz.

Brent Oil futures for August delivery declined USD 3.81, or 4.36 per cent, to USD 83.52 per barrel and West Texas Intermediate (WTI) for July contract slipped USD 4.16, or 4.90 per cent, to USD 80.72 per barrel at NYMEX.

According to analysts, the proposed agreement, expected to be formalised later this week, reportedly includes sanctions relief, restrictions on Iran’s nuclear programme and measures to normalise the country’s oil exports.

The prospect of the Strait of Hormuz — through which around one-fifth of the world’s oil and fuel consumption passes — reopening for normal shipping and the possibility of additional Iranian crude supplies entering the market eased fears of prolonged supply disruptions, they added.

However, analysts cautioned that the agreement still awaits formal implementation and tanker traffic may not immediately return to pre-conflict levels.

Rajesh Palviya, Head of Research at Axis Direct, said, “Brent crude, already under pressure after last week’s sharp decline, is likely to remain subdued, which is a significant positive for India’s macroeconomic outlook through lower inflationary pressures and a reduced import bill.” “Investors should continue to monitor crude oil prices and developments surrounding the implementation of the geopolitical agreement, as any unexpected setback could temporarily weigh on market sentiment,” he added.

Market participants are expected to track a busy week for central banks, including the US Federal Reserve’s (Fed) policy meeting.

Traders will also closely watch Fed Chair Kevin Warsh’s first policy meeting and his commentary on Wednesday for cues on the growth outlook and its implications for energy demand.