- Crude oil prices expected to decline due to higher supply and subdued demand dynamics
- Brent crude may test $90–92 per barrel amid ongoing US-Iran tensions and market volatility
- OPEC+ raised production by 1.96 million barrels per day in October, increasing supply concerns
Crude oil prices are expected to remain on a downward trajectory this week as prospects of increased global supply, rising inventories and subdued demand-supply dynamics continue to exert pressure on the market, according to analysts. However, escalating tensions between the US and Iran could provide some support to prices, limiting losses while fuelling volatility.
Brent crude, the global benchmark, may test $90–92 per barrel in overseas trade, though the overall price trend is expected to remain weak, according to Ajit Mishra, senior vice president of research at Religare Broking.
Market participants will track API inventory estimates, US crude imports and official stock data for cues on supply-demand trends. Developments in West Asia will remain a key driver of market sentiment amid persistent tensions between the US and Iran.
Iran on Sunday claimed to have launched six drones at a US air-defence radar facility at Bahrain's Al-Rifaa base. US President Donald Trump had earlier indicated a willingness to pause further military strikes on Iran if Tehran and its Houthi allies avoided further escalation. Washington, however, has continued its naval blockade of Iranian ports.
The standoff has heightened concerns over the Strait of Hormuz, a vital passage for global oil supplies. Any disruption to shipping through the narrow waterway could have significant implications for international energy supplies and trigger a sharp reaction in crude prices.
Despite these geopolitical risks, analysts believe the market is increasingly being driven by supply-demand fundamentals rather than the geopolitical risk premium.
On the Multi Commodity Exchange, crude oil futures for November delivery declined Rs 185 or 2.16% over the past week to settle at Rs 8,369 per barrel. The December contract lost Rs 196 or 2.31% to close at Rs 8,282 per barrel.
International benchmarks also recorded weekly losses. Brent crude futures for January delivery fell $2.48 or 2.52% during the week to settle at $95.84 per barrel on the Intercontinental Exchange. West Texas Intermediate, the US benchmark, declined $2.27 or 2.5% to close at $88.56 per barrel on the New York Mercantile Exchange.
Mishra said Brent had slipped below $96 per barrel for a second consecutive week as higher OPEC+ production, a larger-than-expected increase in US crude inventories and expectations of a global supply surplus outweighed persistent geopolitical concerns.
OPEC+ production increased by nearly 1.96 million barrels per day in October, while US crude inventories rose by 4.66 million barrels, adding to concerns over an increasingly comfortable supply position. OPEC+ is an expanded alliance comprising members of the Organization of the Petroleum Exporting Countries and 10 other major oil-producing nations, including Russia.
While the Strait of Hormuz remains a potential source of supply disruption, the immediate supply-shortage premium in crude prices is gradually unwinding, Mishra said.
For India, a sustained decline in international crude prices could provide significant economic relief. Lower oil prices would help ease inflationary pressures, support the rupee, improve the country's current account position and reduce input costs for businesses, potentially supporting corporate earnings. However, analysts cautioned that any fresh escalation in West Asia or disruption to oil shipments through the Strait of Hormuz could quickly reverse the recent decline and inject renewed volatility into global energy markets.
(With inputs from PTI)
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