Crude oil futures tank over 8% to INR 8,069/barrel over hopes on West Asia conflict de-escalation

Crude oil prices slumped over 8 per cent to INR 8,069 per barrel in futures trade on Tuesday following comments from US President Donald Trump that the conflict with Iran may be nearing its end, easing fears of prolonged supply disruptions.

Ending its three-day rally, crude oil for March delivery depreciated by INR 719, or 8.18 per cent, to INR 8,069 per barrel on the Multi Commodity Exchange (MCX). Similarly, the April contract on the MCX slumped by INR 531, or 6.21 per cent, to INR 8,017 per barrel in 6,359 lots.

The fall came after crude oil prices witnessed extreme volatility. On Monday, the March contract had surged more than 26 per cent to hit a record high of INR 10,549 per barrel.

However, prices later pared gains sharply and closed nearly 17 per cent lower at INR 8,788 per barrel, down by INR 1,761 from the peak level.  Analysts said the oil prices plummeted as easing geopolitical tensions reduced the risk premium that had pushed the energy rates sharply higher in the previous session. Globally, West Texas Intermediate (WTI) crude oil for April delivery fell $6.65, or 7.02 per cent, to $88.12 per barrel, while Brent Crude for May contract was trading 6.1 per cent lower at $92.92 per barrel in New York.

WTI crude futures fell below $90 per barrel after surging to nearly $120 in the previous session, as US President signalled that the war with Iran may be nearing its end and that the military operation is progressing well ahead of its initial timetable, Jigar Trivedi, Senior Research Analyst at IndusInd Securities, said.

On Monday, both WTI and Brent Crude jumped nearly 29 per cent to hit an intraday high of $119.48 and 119.50 per barrel, respectively, after disruptions in the Strait of Hormuz, triggered concerns over global supply of exports.  However, the benchmarks later retreated sharply, dropping up to 21 per cent to settle at $94.77 and 98.96 per barrel, respectively.

Trump also said on Monday that he plans to waive oil-related sanctions and deploy the United States Navy to escort tankers through the Strait of Hormuz for the smooth passage of crude shipments and to keep the oil prices in check. Meanwhile, finance ministers of the G7 said the group “stands ready” to release oil from strategic reserves if necessary, although no action has been taken so far adding more downward pressure on the crude oil prices.