There is welcome news for Indian buyers struggling with high fuel costs. Crude oil prices on the international market have fallen sharply and are now back to where they stood before tensions between the United States and Iran erupted. During the day's trade, Brent crude briefly slipped below $70 a barrel. It is currently changing hands at $73.28 a barrel, down 0.46 percent, while US crude has dropped to $69.95 a barrel.
This steep softening in crude could clear the way for cuts in petrol and diesel prices within the country. The big spike that oil prices saw in recent weeks because of the crisis in the Middle East has now almost completely faded away.
What Is Driving the Drop
The single biggest reason behind this slide is Iran's return to the global oil market. Following the understanding reached between the United States and Iran, large numbers of oil tankers are now passing safely through the Strait of Hormuz with their tracking systems switched on. As a result, the worldwide supply of oil appears to be moving back to normal.
Right now buyers are sitting pretty, because the availability of crude in the market has climbed far higher than expected. Refining companies and buyers are receiving a steady stream of fresh offers from major oil-exporting regions across the world, from the Middle East all the way to West Africa. With Iran's vast oil reserves entering the market, supply is expected to rise even further in the days ahead, which could push prices down still more.
Bearish Contango Shows Up in the Market
The impact of this slowdown is now clearly visible in the prompt spread of Brent crude. On Wednesday, this crucial oil-market indicator slipped technically into bearish contango for the first time since the Middle East conflict began.
Commodity experts say bearish contango simply means that supply of prompt oil currently outweighs demand for it. It is a technical signal that pressure on crude prices is likely to persist in the near future as well.
