Crude oil prices stabilize as fears of all-out war recede

Crude oil prices appear to be stabilizing after a significant spike driven by rising tensions between Israel and Iran. Over the past week, Brent crude prices surged by 13%, reaching $79.4 per barrel on October 7, up from $70.2 just a week earlier. However, analysts predict that the market may soon cool off, alleviating concerns of a sustained price increase.

Union Minister for Petroleum and Natural Gas Hardeep Singh Puri reassured the nation about the stability of oil supplies, stating, “Today there is more oil available in the world than there is consumption.” He emphasized that even if certain suppliers hold back, new sources are available, ensuring there will not be a global oil shortage in the short term.

Currently, India relies on imports for 88% of its crude oil needs, sourcing from 39 countries. This reliance makes the country vulnerable to fluctuations in global oil markets, especially amidst geopolitical tensions. Energy expert Narendra Taneja warned that any escalation, such as Israel attacking Iranian oil installations, could severely disrupt supplies, especially if Iran retaliates by blocking the Straits of Hormuz.

Despite the potential risks, market sentiment remains cautiously optimistic. Experts, including Ian Bremmer of the Eurasia Group, noted that the likelihood of an all-out war is low, as both Israel and Iran are likely to seek de-escalation. Recent reports from ANZ suggest sufficient supply buffers in the market, particularly from OPEC, which could help mitigate any disruptions.

Data from FactSet indicates a downward trend in Brent crude prices for the coming months, with futures for December priced at $79.05, decreasing gradually to $76.77 by May. This suggests that, barring significant geopolitical upheaval, the oil market may return to a more stable state.

The Indian basket of crude oil, which blends various grades, averaged $78.27 per barrel in August, down from $84.15 in July, reflecting a declining trend since reaching a peak of $89.44 earlier this year. As the situation evolves, stakeholders will be closely monitoring market developments and geopolitical dynamics to gauge their impact on oil prices.