Brent crude slipped below the $98-a-barrel mark on Tuesday, offering some relief to oil-importing economies such as India even as investors continued to assess supply risks arising from the conflict in the Middle East. Brent crude was down 2.4% at $97.94 a barrel after rising earlier in the session. The international benchmark had gained 0.42% to $100.74 a barrel for December delivery, while US West Texas Intermediate futures for November had risen 0.32% to $89.72 a barrel.
Gulf producers are moving larger volumes of crude through the Strait of Hormuz, with more tankers navigating the contested waterway despite continued security risks. Kuwait said it is currently pumping oil at around 75% of the level seen before the Iran war, while Iraq is looking to hire additional vessels to transport crude through Hormuz.
Saudi Arabia has also increased the use of its East-West pipeline, which provides an alternative export route that bypasses the Strait of Hormuz. Saudi Energy Minister Prince Abdulaziz bin Salman said the kingdom is pumping around 5.8 million barrels a day through the pipeline.
Saudi Aramco has also cut the price of its flagship Arab Light crude for Asian buyers to a six-year low as it seeks to protect market share.
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According to N S Ramaswamy, Head of Commodity & CRM at Ventura, crude prices have experienced heightened volatility over the past several months, with Brent and WTI trading around the $90-$100 range.
“Middle East crude exports have increased showing signs of stabilizing or recovering crude flows from the region. These have recently weighed on prices and eased extreme spikes,” Ramaswamy said.
Supply Risks Remain
Despite the recent pullback, the global oil market remains vulnerable to further disruptions. Saudi Aramco CEO Amin Nasser said global oil stockpiles could take two years to rebuild and warned that supply pressures could worsen if the Iran-US conflict continues.
Brent remains around 65% higher this year after the US and Israel attacked Iran in February, disrupting supplies and fuelling inflation.
While crude flows from the Middle East have moved closer to pre-conflict levels, product markets remain particularly tight, partly due to Ukrainian attacks on Russian energy infrastructure. The Group of Seven and its partners have responded by increasing releases from strategic stockpiles.
The conflict has also damaged oil pipelines, refineries, gas plants and tankers, creating significant reconstruction and infrastructure investment requirements.
What This Means For India
For India, a sustained decline in crude prices would be a positive development because the country imports a large portion of its oil requirement. Lower crude prices can help reduce the import bill, ease pressure on the current account and support the rupee. They can also moderate domestic inflationary pressures, particularly through transportation and fuel costs.
"In the context of Indian markets, with over 85% import of Crude, the higher global crude prices increase domestic fuel, logistics and freight expenses. Elevated transport costs seep into food items, manufacturing, and consumer goods pricing. Imported inflation has complicated the Central Bank's rate-cut trajectory raising risks of higher-for-longer interest rates," Ramaswamy said.
The impact can extend to corporate earnings as well. Airlines, paints, tyres, chemicals and other industries that are sensitive to energy and crude-linked input costs could benefit from lower raw material and operating expenses.
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