Crude Oil Heads for Fourth Weekly Loss as Hormuz Flows Normalise and US-Iran Peace Talks Advance

Mumbai, July 5: Crude oil prices recorded their fourth consecutive weekly decline during the week ended July 3, as the steady resumption of tanker traffic through the Strait of Hormuz and ongoing US-Iran peace negotiations continued to erode the geopolitical risk premium that had propelled prices to multi-year highs earlier in the year.

Brent crude, the international oil benchmark, fell 1.3% over the week to USD 71.74 a barrel in afternoon trading on Friday, while West Texas Intermediate futures settled 0.4% lower at USD 68.40 a barrel. Both benchmarks have now returned to pre-war levels, with prices having shed more than 20% since the peak of the US-Iran conflict.

On the Multi Commodity Exchange, crude oil futures for July delivery slipped by ₹48, or 0.74%, to ₹6,477 per barrel on Thursday amid weak spot demand and profit booking by market participants.

Brent Crude Hovers Near USD 71 as Saudi Shipments Recover to 90% of Pre-Conflict Levels

Global crude markets remained under pressure throughout the week as supply-side concerns continued to ease. Brent crude traded above USD 71 a barrel on Friday, while WTI hovered near USD 68, with both benchmarks on track to post a fourth consecutive weekly decline. If realised, it would mark Brent’s longest weekly losing streak since August 2024.

The recent weakness in prices reflects improving supply conditions across the Middle East, with tanker traffic through the Strait of Hormuz continuing to increase. Saudi Arabia’s crude exports have now recovered to around 90% of their pre-conflict levels, with more vessels successfully navigating the strategic waterway.

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The United Arab Emirates has also restored exports following the recovery in shipping through Hormuz. The market is also signalling ample near-term supply, with Brent’s prompt spread remaining in contango — a structure where near-term contracts trade below later-dated ones — for much of the week, typically indicating expectations of oversupply.

Geopolitical Risk Premium Fades as US-Iran Talks Progress on Long-Term Peace Agreement

Oil’s geopolitical risk premium continued to fade as talks between Washington and Iran on a long-term peace agreement progressed. US President Donald Trump said negotiations with Iran were continuing and claimed Tehran had “agreed to just about everything we need”. However, reports suggest significant differences remain, with Western negotiators having proposed unfreezing billions of dollars in Iranian funds held overseas in exchange for Tehran dropping its claim over oversight of the Strait of Hormuz and abandoning plans to levy transit fees on ships using the route. Iran has reportedly shown little willingness to compromise on those demands. The easing of geopolitical tensions follows positive discussions in Qatar, where both sides have been working to extend the current 60-day ceasefire into a more durable agreement.

Despite the progress, key issues such as the future of Iran’s nuclear program or transit fees on vessels navigating the strait remain unresolved and could delay, or halt, a comprehensive peace deal. These unresolved diplomatic issues have the potential to trigger intermittent market volatility, according to MUFG analyst Soojin Kim.

US Crude Inventories Fall for 10th Consecutive Week to 408.4 Million Barrels

US commercial crude oil inventories extended their decline for a 10th consecutive week, according to data released Wednesday by the US Energy Information Administration. Commercial crude stocks excluding the Strategic Petroleum Reserve fell by 3.8 million barrels to 408.4 million barrels in the week ended June 26, and were about 7% below the five-year average for the time of year.

The draw was larger than analyst expectations of a 3.1 million-barrel decline, according to a Wall Street Journal survey. Oil stored in the SPR was down by 5.5 million barrels at 325.7 million barrels on continued emergency releases.

The EIA estimated US crude oil production at 13.8 million barrels a day, practically unchanged from the previous week. Crude imports fell by 291,000 barrels a day to 5.3 million barrels a day, while exports fell by 661,000 barrels a day to 4 million barrels a day.

Refineries operated at 96.6% of capacity, up from 96.1% the week before. Gasoline inventories decreased by 2.3 million barrels to 214 million barrels against expectations of a 700,000-barrel draw.

Oil’s Aggressive Selloff Reflects Misplaced Optimism, Warns ING Analyst

Flows exiting the Strait of Hormuz are beginning to normalise and are turning market sentiment more bearish. Fears of an impending supply crunch have been replaced by some expecting a near-term supply glut.

However, ING analyst Warren Patterson cautioned that oil’s aggressive selloff reflects misplaced optimism over the speed and sustainability of supply coming from the Middle East. The market is prematurely expecting oil supplies from the region will return to normal and underappreciating the risk the conflict flares up again, he said.

Stronger-than-expected demand destruction is also weighing on prices, with the more aggressive the demand destruction, the less global inventories are drawn down. This means there is more pre-existing supplies which would dent demand to refill storage tanks.

MCX Crude Oil Futures Slip to ₹6,477 as Weak Global Cues and Profit Booking Weigh

Domestic crude oil futures declined in trade on the Multi Commodity Exchange, with prices for July delivery falling ₹48, or 0.74%, to ₹6,477 per barrel in a business turnover of 3,883 lots. Analysts attributed the decline to participants offloading their holdings amid weak demand in the spot market.

Globally, WTI crude was trading 1.11% lower at USD 67.84 per barrel, while Brent crude declined 1.09% to USD 70.79 per barrel in New York. The weakness in domestic futures mirrored the broader bearish sentiment in international markets, as improving supply conditions and fading geopolitical risks continued to pressure prices.

India’s Crude Oil Imports Return to Normal Levels in June, Russia Emerges as Primary Supplier

India’s crude oil imports returned to normal levels in June, recovering after earlier disruptions caused by geopolitical tensions and supply bottlenecks linked to the Strait of Hormuz, according to Kpler data. India’s crude oil imports hit a milestone in June, as Russia emerged as the primary supplier, followed closely by the UAE’s near-record imports.

The normalisation of imports comes as a relief for the world’s third-largest oil importer, which had faced significant supply challenges during the height of the US-Iran conflict. Lower crude prices have eased India’s import bill and reduced rupee and inflation risks.

The rupee strengthened after crude prices fell because cheaper oil improves India’s external account outlook. For import-heavy India, every USD 10 per barrel decline in oil prices reduces the current account deficit by approximately 0.5% of GDP.

Petrol and Diesel Prices Remain Unchanged Across Major Cities on July 3

Petrol and diesel prices remained largely unchanged across India’s major metro cities and state capitals on Friday, July 3, with fuel rates holding steady in Delhi, Mumbai, Kolkata, Chennai, Hyderabad, Jaipur, Lucknow, Chandigarh, Gurugram and Noida. In the national capital, petrol continued to retail at ₹102.12 per litre while diesel held at ₹95.20 per litre. Mumbai recorded petrol at ₹111.21 per litre and diesel at ₹97.83 per litre. Kolkata remained the costliest metro for petrol at ₹113.51 per litre, while Hyderabad had the highest diesel price among metros at ₹103.82 per litre. New Delhi and Chandigarh continued to offer the lowest petrol and diesel rates, respectively.

Nayara Energy Cuts Petrol by ₹5 and Diesel by ₹3 per Litre Amid Falling Crude Prices

Private fuel retailer Nayara Energy reduced petrol prices by ₹5 per litre and diesel prices by ₹3 per litre across its network of more than 7,000 fuel stations nationwide on Wednesday, July 1. The move came as global crude oil prices continued to trade near four-month lows, providing room for private retailers to offer discounts to consumers.

However, Oil Minister Hardeep Singh Puri has said “the question of bringing fuel prices down is not legitimate at this point in time,” stating that state-run oil marketing companies are still dealing with cumulative under-recoveries of around ₹2.18 lakh crore and continue to hold inventories procured when crude prices were significantly higher. Puri noted that petrol prices have risen only 5.58% over the past four years, while diesel prices have increased 6.23% during the same period.

Ever since the US-Iran War began, fuel prices have been hiked four times, with the latest increase of ₹2.6 and ₹2.7 per litre respectively announced last month. So far, prices have increased by ₹7.5-8 per litre since the start of the war.

Bhubaneswar Records Sharpest Fuel Price Increase, Bengaluru and Patna See Reductions

While most major cities saw no change in fuel prices on July 3, a handful of cities witnessed revisions. Bhubaneswar recorded the sharpest increase, with petrol prices rising by ₹1.52 per litre to ₹110.49 and diesel prices increasing by ₹1.47 per litre to ₹102.15. Thiruvananthapuram saw petrol rise by ₹0.69 to ₹115.49 per litre and diesel by ₹0.76 to ₹104.40 per litre. In contrast, prices eased by ₹0.75 in Bengaluru to ₹110.93 per litre for petrol and fell ₹0.76 to ₹98.80 for diesel. Patna saw reductions of ₹0.32 for petrol to ₹113.37 and ₹0.31 for diesel to ₹99.36 per litre.

OPEC+ to Hold Monthly Meeting on July 5 as Markets Await Production Signals

On Sunday, July 5, the Organization of the Petroleum Exporting Countries will host its monthly meeting while market watchers are expecting Saudi Arabia’s official selling prices. This will offer an insight into the kingdom’s outlook for demand in Asia and other key export markets.

The meeting comes after seven OPEC+ nations, namely Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman, agreed to increase daily oil production by 188,000 barrels in July, marking the fourth straight monthly output hike. The decision follows a similar move taken by the seven OPEC+ countries in May, when they agreed to increase production by 188,000 barrels per day for June.

The next review meeting is scheduled for July 5, 2026, where the seven countries will assess market conditions again before deciding whether to continue returning production to the market, maintain current levels or adjust their strategy.

Market participants should monitor the OPEC+ meeting scheduled for July 5, which will provide crucial signals on the cartel’s production strategy amid recovering Middle East supplies. Upcoming US inflation data and Federal Reserve communications will also influence dollar strength and, consequently, oil prices. Consumers should note that while global crude prices have fallen significantly, retail fuel prices in India have remained largely unchanged due to OMCs’ inventory costs and under-recoveries, though private retailers like Nayara have offered selective cuts.

Source

• https://ppac.gov.in/prices/international-prices-of-crude-oil

• https://www.eia.gov/dnav/pet/pet_pri_spt_s1_d.htm